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Firm Heterogeneity And The Labor Market Effects Of Trade Liberalization

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  • Hartmut Egger
  • Udo Kreickemeier

Abstract

This article develops a model that incorporates workers' fair wage preferences into a general equilibrium framework with heterogeneous firms. In a setting where the wage considered to be fair by workers depends on the productivity of the firm they are working in, we study the determinants of profits, involuntary unemployment and within-group wage inequality. We use this model to investigate the effects of globalization, thereby pointing to distributional conflicts that have so far not been accounted for: a simultaneous increase of average profits and involuntary unemployment as well as a surge in within-group wage inequality. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Hartmut Egger & Udo Kreickemeier, 2009. "Firm Heterogeneity And The Labor Market Effects Of Trade Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 187-216, February.
  • Handle: RePEc:ier:iecrev:v:50:y:2009:i:1:p:187-216
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    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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