Inequality and International Trade: The Role of Skill-Biased Technology and Search Frictions
AbstractA 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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Bibliographic InfoPaper provided by Department of Economics, Temple University in its series DETU Working Papers with number 1204.
Date of creation: Sep 2012
Date of revision:
Directed Search; Inequality; International Trade;
Find related papers by JEL classification:
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-DGE-2012-10-13 (Dynamic General Equilibrium)
- NEP-MAC-2012-10-13 (Macroeconomics)
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