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Labor Markets and Kaleidoscopic Comparative Advantage

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  • Daniel A. Traça

Abstract

This paper addresses the labor market implications of an increase in openness and foreign competition. It develops a model where industry-specific productivity shocks create uncertainty, producing an environment of kaleidoscopic comparative advantage (Bhagwati, 1998). The key assumption is that risk markets are imperfect, as wage-contracts are subject to uninsurable bankruptcy risk. In this context, the paper analyzes the consequences for wage levels, wage volatility, job-instability and income distribution, of the openness of previously non-traded industries to the forces of international trade and foreign competition.

Suggested Citation

  • Daniel A. Traça, 2000. "Labor Markets and Kaleidoscopic Comparative Advantage," Working Papers w200004, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w200004
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp200004.pdf
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    References listed on IDEAS

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    1. Marianne Bertrand, 2004. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 723-766, October.
    2. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
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    Cited by:

    1. Don J. Webber & Michael Horswell, 2009. "Winners and Losers: Spatial variations in labour productivity in England and Wales," Working Papers 0912, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.

    More about this item

    JEL classification:

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

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