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Labor markets and kaleidoscopic comparative advantage

Author

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  • Daniel Traca

Abstract

Capturing the notion of kaleidoscopic comparative advantage (Bhagwati, 1998), we show that international trade increases the volatility of profitability. In this framework, we address the labor market implications of an increase in openness, when insurance and credit markets are imperfect. With kaleidoscopic comparative advantage, trade raises the likelihood of firm shutdown and worker displacement, which, in equilibrium, affects wage contracts. In a simple model, we analyze the consequences for wage levels, earnings volatility, job instability, and income distribution, of the openness of previously nontraded industries to international trade.

Suggested Citation

  • Daniel Traca, 2005. "Labor markets and kaleidoscopic comparative advantage," ULB Institutional Repository 2013/9223, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/9223
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    Cited by:

    1. is not listed on IDEAS
    2. 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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