Skill Dierentiation and Income Disparity in a Decentralized Matching Model of North-South Trade
AbstractThis paper develops a North-South trade model in which the South produces food and the North produces both food and a high-tech good. Food production is undertaken by unskilled workers while the high-tech product is made only by horizontally dierentiated skilled workers. Due to the possibility of a peer-group effect, we allow the unskilled workers in the North to be equally or more productive than in the South. Horizontal matching of skilled workers is generally imperfect and the skilled wages are determined by a symmetric Nash bargain. We characterize two dierent types of equilibrium: a closed-economy equilibrium without trade and a free trade equilibrium without labor mobility. We then extend the benchmark framework to consider the presence of transport costs. In all cases with trade, the equilibrium properties of goods pricing, the volume of trade and wage disparities are examined.
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Bibliographic InfoPaper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0115.
Date of creation: 2001
Date of revision:
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skill heterogeneity and matching; north-south trade; wage inequality;
Other versions of this item:
- Hesham M. Abdel-Rahman & George Norman & Ping Wang, 2001. "Skill Differentiation and Income Disparity in a Decentralized Matching Model of North-South Trade," Vanderbilt University Department of Economics Working Papers 0131, Vanderbilt University Department of Economics.
- F10 - International Economics - - Trade - - - General
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-AFR-2001-10-22 (Africa)
- NEP-ALL-2001-10-22 (All new papers)
- NEP-LAB-2001-10-22 (Labour Economics)
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