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Market Entry Costs, Underemployment and International Trade

Author

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  • Spiros Bougheas
  • Raymond Riezman

Abstract

We develop a small, open economy, two-sector model with heterogeneous agents and endogenous participation in a labor matching market. We analyze the implications of asymmetric market entry costs for the patterns of international trade and underemployment. Furthermore, we examine the welfare implications of trade liberalization and find that under certain conditions the patterns of trade are not optimal. We also examine the robustness of our results when we allow for complementarities in the production function and for alternative matching mechanisms.

Suggested Citation

  • Spiros Bougheas & Raymond Riezman, 2010. "Market Entry Costs, Underemployment and International Trade," CESifo Working Paper Series 3263, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3263
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    References listed on IDEAS

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    1. Gabriel J. Felbermayr & Mario Larch & Wolfgang Lechthaler, 2013. "Unemployment in an Interdependent World," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 262-301, February.
    2. Arnaud Costinot & Jonathan Vogel, 2010. "Matching and Inequality in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 747-786, August.
    3. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Journal of Economic Theory, Elsevier, vol. 146(1), pages 39-73, January.
    4. Spiros Bougheas & Raymond Riezman, 2013. "Trade and the distribution of human capital," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 20, pages 395-407 World Scientific Publishing Co. Pte. Ltd..
    5. Udo Kreickemeier & Douglas Nelson, 2017. "Fair Wages, Unemployment, and Technological Change in a Global Economy," World Scientific Book Chapters,in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 8, pages 205-235 World Scientific Publishing Co. Pte. Ltd..
    6. Carl Davidson & Steven J. Matusz, 2006. "Trade Liberalization And Compensation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 723-747, August.
    7. repec:wsi:wschap:9789813224919_0012 is not listed on IDEAS
    8. Hartmut Egger & Udo Kreickemeier, 2017. "Fairness, Trade, and Inequality," World Scientific Book Chapters,in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 12, pages 339-380 World Scientific Publishing Co. Pte. Ltd..
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    10. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
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    12. Franziska Ohnsorge & Daniel Trefler, 2007. "Sorting It Out: International Trade with Heterogeneous Workers," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 868-892, October.
    13. Fan, Chengze Simon & Overland, Jody & Spagat, Michael, 1999. "Human Capital, Growth, and Inequality in Russia," Journal of Comparative Economics, Elsevier, vol. 27(4), pages 618-643, December.
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    Cited by:

    1. Zuzana Brixiova, 2013. "Modeling productive entrepreneurship in developing countries," Small Business Economics, Springer, vol. 41(1), pages 183-194, June.
    2. Davidson, Carl & Sly, Nicholas, 2014. "A simple model of globalization, schooling and skill acquisition," European Economic Review, Elsevier, vol. 71(C), pages 209-227.

    More about this item

    Keywords

    entry costs; patterns of trade; underemployment;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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