Labour Mobility, Capital-Skill Complementarity and the Redistributive Effects of Trade Integration
AbstractThis paper addresses the role of mobility costs in shaping the effects of trade integration on wage inequality and welfare. We present a three-factor, two-sector model in which the production technology exhibits capital-skill complementarity and the cost of moving across sectors differs between unskilled and skilled workers. We consider a proportional tax on skilled workers’ wage that is used to finance a re-training program to reduce the mobility costs of unskilled workers. We show that if the training program is sufficiently effective, a positive tax rate can both reduce wage inequalities and reinforce the welfare-enhancing effects of trade integration. In addition we show that, even when the public programme entails some welfare losses, it can make trade integration Pareto superior with respect to autarky.
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Bibliographic InfoPaper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 188.
Length: pages 25
Date of creation: Nov 2006
Date of revision: Nov 2006
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Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-10 (All new papers)
- NEP-GEO-2007-02-10 (Economic Geography)
- NEP-INT-2007-02-10 (International Trade)
- NEP-MAC-2007-02-10 (Macroeconomics)
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