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Matching, Sorting, and the Distributional Effects of International Trade

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  • Gene M. Grossman
  • Elhanan Helpman
  • Philipp Kircher

Abstract

We study the distributional consequences of trade in a world with two industries and two heterogeneous factors of production. Productivity in each production unit reflects the ability of the manager and the abilities of the workers, with complementarity between the two. We begin by examining the forces that govern the sorting of worker and manager types to industries and the matching of workers and managers within industries. We then consider how changes in relative output prices generated by changes in the trading environment affect sorting, matching, and the distributions of wages and salaries.

Suggested Citation

  • Gene M. Grossman & Elhanan Helpman & Philipp Kircher, 2017. "Matching, Sorting, and the Distributional Effects of International Trade," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 224-264.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/689608
    DOI: 10.1086/689608
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    Cited by:

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    3. Giordani, Paolo E. & Mariani, Fabio, 2022. "Unintended consequences: Can the rise of the educated class explain the revival of protectionism?," Journal of Economic Theory, Elsevier, vol. 200(C).
    4. Emilie M. Hafner-Burton & Layna Mosley & Robert Galantucci, 2019. "Protecting Workers Abroad and Industries at Home: Rights-based Conditionality in Trade Preference Programs," Journal of Conflict Resolution, Peace Science Society (International), vol. 63(5), pages 1253-1282, May.
    5. Lee, Eunhee & Yi, Kei-Mu, 2018. "Global value chains and inequality with endogenous labor supply," Journal of International Economics, Elsevier, vol. 115(C), pages 223-241.
    6. Schetter, Ulrich & Tejada, Oriol, 2018. "Globalization and the Concentration of Talent," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181562, Verein für Socialpolitik / German Economic Association.
    7. Heiland, Inga & Kohler, Wilhelm, 2022. "Heterogeneous workers, trade, and migration," European Economic Review, Elsevier, vol. 144(C).
    8. Wen-Tai Hsu & Lin Lu & Pierre M. Picard, 2023. "Income inequality, productivity, and international trade," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(1), pages 203-249, July.
    9. Rodrigo Adao & Paul E. Carrillo & Arnaud Costinot & Dave Donaldson & Dina Pomeranz, 2020. "International Trade and Earnings Inequality: A New Factor Content Approach," Working Papers 2020-182, Becker Friedman Institute for Research In Economics.
    10. Borrs, Linda & Knauth, Florian, 2021. "Trade, technology, and the channels of wage inequality," European Economic Review, Elsevier, vol. 131(C).
    11. Yuki, Kazuhiro, 2012. "Mechanization, task assignment, and inequality," MPRA Paper 37754, University Library of Munich, Germany.
    12. Egger, Hartmut & Egger, Peter & Kreickemeier, Udo & Moser, Christoph, 2020. "The exporter wage premium when firms and workers are heterogeneous," European Economic Review, Elsevier, vol. 130(C).
    13. Muhammed A. Yildirim, 2021. "Sorting, Matching and Economic Complexity," CID Working Papers 392, Center for International Development at Harvard University.
    14. Sampson, Thomas, 2016. "Assignment reversals: Trade, skill allocation and wage inequality," Journal of Economic Theory, Elsevier, vol. 163(C), pages 365-409.
    15. Zaman, Kazi Arif Uz & Kalirajan, Kaliappa, 2019. "Strengthening of energy security & low-carbon growth in Asia: Role of regional energy cooperation through trade," Energy Policy, Elsevier, vol. 133(C).
    16. Gueyon Kim & Dohyeon Lee, 2020. "Offshoring and Segregation by Skill: Theory and Evidence," Working Papers 2020-073, Human Capital and Economic Opportunity Working Group.
    17. Zachary Cohle, 2019. "Global Innovative R&D Offshoring with Heterogeneous Labor: The Role of IPR‐Protection on Technology Transfer and the Brain Drain Effect," Southern Economic Journal, John Wiley & Sons, vol. 86(2), pages 691-725, October.
    18. Khan, Nazmus Sadat, 2020. "Revisiting the effects of NAFTA," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 1-16.
    19. Bombardini, Matilde & Orefice, Gianluca & Tito, Maria D., 2019. "Does exporting improve matching? Evidence from French employer-employee data," Journal of International Economics, Elsevier, vol. 117(C), pages 229-241.
    20. Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2018. "Dealing with Illegal Immigration: the Role of Informality, Taxation and Trade," LIDAM Discussion Papers IRES 2018007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    21. Choi, Jaerim, 2023. "Offshoring, matching, and income inequality," Journal of Mathematical Economics, Elsevier, vol. 106(C).
    22. Huber, Katrin & Winkler, Erwin, 2019. "All you need is love? Trade shocks, inequality, and risk sharing between partners," European Economic Review, Elsevier, vol. 111(C), pages 305-335.
    23. Meng, Xiangyi & Zhou, Bin, 2023. "Scale-free networks beyond power-law degree distribution," Chaos, Solitons & Fractals, Elsevier, vol. 176(C).

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