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Inheritance, Search Friction and International Trade: A General Equilibrium Model

  • Mazumder, Debojyoti
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    In a general equilibrium framework, an economy, with one non-traded final good and two traded intermediate goods, is modeled in this paper. It is shown that even if the economy consists of one frictionless labor market and a labor market with the search-friction, a status-conscious preference can yield unemployment in equilibrium. If such an economy opens up to trade then comparative advantage can be generated through the difference in the degree of the labor market imperfection even between two otherwise very similar countries. This setup rejects the possibility of complete specialization. Wage inequality persists within the country, for both home and foreign, in spite of free trade and, free trade does not guarantee the reduction of unemployment.

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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 55250.

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    Date of creation: 28 Dec 2013
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    Handle: RePEc:pra:mprapa:55250
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    1. Dutt, Pushan & Mitra, Devashish & Ranjan, Priya, 2009. "International trade and unemployment: Theory and cross-national evidence," Journal of International Economics, Elsevier, vol. 78(1), pages 32-44, June.
    2. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
    3. Pinelopi K. Goldberg & Nina Pavcnik, 2003. "The Response of the Informal Sector to Trade Liberalization," NBER Working Papers 9443, National Bureau of Economic Research, Inc.
    4. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
    5. Carl Davidson & Steven J. Matusz, 2006. "Long-run Lunacy, Short-run Sanity: a Simple Model of Trade with Labor Market Turnover," Review of International Economics, Wiley Blackwell, vol. 14(2), pages 261-276, 05.
    6. Mitra, Devashish & Ranjan, Priya, 2010. "Offshoring and unemployment: The role of search frictions labor mobility," Journal of International Economics, Elsevier, vol. 81(2), pages 219-229, July.
    7. Carl Davidson & Steven J. Matusz, 2004. "An Overlapping-generations Model of Escape Clause Protection," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 749-768, November.
    8. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
    9. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Globalization and firm level adjustment with imperfect labor markets," Journal of International Economics, Elsevier, vol. 75(2), pages 295-309, July.
    10. Vishwanath, Tara, 1989. "Job Search, Stigma Effect, and Escape Rate from Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 487-502, October.
    11. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
    12. Benedikt Heid & Mario Larch & Alejandro RiaƱo, 2013. "The Rise of the Maquiladoras: A M ixed Blessing," Review of Development Economics, Wiley Blackwell, vol. 17(2), pages 252-267, 05.
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