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Heterogeneous Workers, Trade, and Migration

Author

Listed:
  • Inga Heiland
  • Wilhelm Kohler

Abstract

We argue that the narrative of variety-induced gains from trade in differentiated goods needs revision. If producing differentiated varieties of a good requires differentiated skills and if the work force is heterogeneous in these skills, then firms are likely to have monopsony power. We show that trade then has adverse labor market effects: It increases the monopsony power of firms and worsens the average quality of matches between firms and workers. We also show that international migration has the opposite beneficial effects. Our model can explain two-way migration among similar countries, a pattern that features prominently in migration data.

Suggested Citation

  • Inga Heiland & Wilhelm Kohler, 2013. "Heterogeneous Workers, Trade, and Migration," CESifo Working Paper Series 4387, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4387
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp4387.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    two-way migration; gains from trade; heterogeneous workers;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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