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Inequality and International Trade: The Role of Skill-Biased Technology and Search Frictions

  • Moritz Ritter

    ()

    (Department of Economics, Temple University)

A competitive search model of the labor market is embedded into a small open economy with firm and worker heterogeneity. Search frictions generate equilibrium unemployment and income inequality between identical workers, in addition to income differences between skill groups. Numerical simulations of the model reveal that an increase in trade is likely to increase within-group inequality and decrease unemployment, while the effect on the skill premium is ambiguous. Overall the effect of trade on the labor market is minor if only a small fraction of the labor force is employed in exporting and import-competing industries.

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File URL: http://www.cla.temple.edu/RePEc/documents/detu_2012_04.pdf
File Function: First Version, 2012
Download Restriction: no

Paper provided by Department of Economics, Temple University in its series DETU Working Papers with number 1204.

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Date of creation: Sep 2012
Date of revision:
Handle: RePEc:tem:wpaper:1204
Contact details of provider: Postal: Ritter Annex 877, Philadelphia, PA 19122
Phone: 215.204.8880
Fax: 215.204.8173
Web page: http://www.cla.temple.edu/economics/

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  1. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
  2. 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.
  3. A. Kerem Coşar & Nezih Guner & James Tybout, 2010. "Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy," NBER Working Papers 16326, National Bureau of Economic Research, Inc.
  4. Moritz Ritter, 2012. "Trade and Inequality in a Directed Search Model with Firm and Worker Heterogeneity," DETU Working Papers 1202, Department of Economics, Temple University.
  5. William Hawkins, 2015. "Bargaining with Commitment Between Workers and Large Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 350-364, April.
  6. Kaas, Leo & Kircher, Philipp, 2011. "Efficient Firm Dynamics in a Frictional Labor Market," IZA Discussion Papers 5452, Institute for the Study of Labor (IZA).
  7. Ian King & Frank Stahler, 2010. "A Simple Theory of Trade and Unemployment in General Equilibrium," Department of Economics - Working Papers Series 1116, The University of Melbourne.
  8. Jonathan Vogel & Arnaud Costinot, 2008. "Matching and Inequality in the World Economy," 2008 Meeting Papers 879, Society for Economic Dynamics.
  9. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Outsourcing Peter To Pay Paul: High-Skill Expectations And Low-Skill Wages With Imperfect Labor Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 12(04), pages 463-479, September.
  10. Danielken Molina & Marc-Andreas Muendler, 2013. "Preparing to Export," NBER Working Papers 18962, National Bureau of Economic Research, Inc.
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