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International Trade and Labor Market Discrimination

Author

Listed:
  • Richard Chisik

    (Ryerson University)

  • Julian Emami Namini

    (Erasmus University Rotterdam)

Abstract

We embed a competitive search model with labor market discrimination, or nepotism, into a two-sector, two-country framework in order to analyze how labor market discrimination impacts the pattern of international trade and also how trade affects discrimination. Discrimination, or nepotism, reduces the matching probability and output in the skilled-labor intensive differentiated-product sector so that the country with more discriminatory firms has a comparative advantage in the simple sector. As countries alter their production mix in accordance with their comparative advantage, trade liberalization can then reinforce the negative effect of discrimination on development in the more discriminatory country and reduce its effect in the country with fewer discriminatory firms. Similarly, the profit difference between non-discriminatory and discriminatory firms increases in the less discriminatory country and shrinks in the more discriminatory one. In this way trade can further reduce discrimination in a country where it is less prevalent and increase it where it is more firmly entrenched.

Suggested Citation

  • Richard Chisik & Julian Emami Namini, 2016. "International Trade and Labor Market Discrimination," Development Working Papers 401, Centro Studi Luca d'Agliano, University of Milano, revised 14 Sep 2016.
  • Handle: RePEc:csl:devewp:401
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    File URL: https://www.dagliano.unimi.it/media/WP2016_401.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Discrimination; Nepotism; International Trade; Competitive Search;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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