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Inequality and International Trade: The Role of Skill-Biased Technology and Search Frictions

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  • Moritz Ritter

    ()
    (Department of Economics, Temple University)

Abstract

A competitive search model of the labor market is embedded into a small open economy with firm and worker heterogeneity. Search frictions generate equilibrium unemployment and income inequality between identical workers, in addition to income differences between skill groups. Numerical simulations of the model reveal that an increase in trade is likely to increase within-group inequality and decrease unemployment, while the effect on the skill premium is ambiguous. Overall the effect of trade on the labor market is minor if only a small fraction of the labor force is employed in exporting and import-competing industries.

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File URL: http://www.cla.temple.edu/RePEc/documents/detu_2012_04.pdf
File Function: First Version, 2012
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Bibliographic Info

Paper provided by Department of Economics, Temple University in its series DETU Working Papers with number 1204.

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Date of creation: Sep 2012
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Handle: RePEc:tem:wpaper:1204

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Postal: Ritter Annex 877, Philadelphia, PA 19122
Phone: 215.204.8880
Fax: 215.204.8173
Web page: http://www.cla.temple.edu/economics/
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Related research

Keywords: Directed Search; Inequality; International Trade;

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  1. Ian King & Frank Stahler, 2010. "A Simple Theory of Trade and Unemployment in General Equilibrium," Department of Economics - Working Papers Series 1116, The University of Melbourne.
  2. Leo Kaas & Philipp Kircher, 2011. "Efficient Firm Dynamics in a Frictional Labor Market," Working Paper Series of the Department of Economics, University of Konstanz 2011-01, Department of Economics, University of Konstanz.
  3. Nezih Guner & James Tybout & A. Kerem Cosar, 2009. "Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy," 2009 Meeting Papers 811, Society for Economic Dynamics.
  4. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
  5. Danielken Molina & Marc-Andreas Muendler, 2013. "Preparing to Export," NBER Working Papers 18962, National Bureau of Economic Research, Inc.
  6. Arnaud Costinot & Jonathan Vogel, 2009. "Matching and Inequality in the World Economy," NBER Working Papers 14672, National Bureau of Economic Research, Inc.
  7. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Globalization and firm level adjustment with imperfect labor markets," Journal of International Economics, Elsevier, vol. 75(2), pages 295-309, July.
  8. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Outsourcing Peter To Pay Paul: High-Skill Expectations And Low-Skill Wages With Imperfect Labor Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 12(04), pages 463-479, September.
  9. William B. Hawkins, 2011. "Bargaining with Commitment between Workers and Large Firms," 2011 Meeting Papers 308, Society for Economic Dynamics.
  10. Moritz Ritter, 2012. "Trade and Inequality in a Directed Search Model with Firm and Worker Heterogeneity," DETU Working Papers 1202, Department of Economics, Temple University.
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