Hesham M. Abdel-Rahman () (Department of Economics and Finance, University of New Orleans) George Norman () (Department of Economics, Tufts University) Ping Wang () (Department of Economics, Vanderbilt University)
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This 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 differentiated 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 different 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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Paper provided by Department of Economics, Vanderbilt University in its series Working Papers with number
0131.
Find related papers by JEL classification: 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
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