Trade, inequality, and the endogenous sorting ofheterogeneous workers

Eunhee Lee

Journal of International Economics, 2020, vol. 125, issue C

Abstract: I present a new general equilibrium framework to quantify the effect of international trade on labor market outcomes such as the skill premium and reallocation of workers for a large number of countries. Worker-level comparative advantage based on workers' heterogeneous productivities is the key feature of the framework. I use household-level microdata to quantify key aspects of the model for 32 countries. I find that the calibrated decline in trade costs during 2000–2007 increased between-educational-type inequality in most countries regardless of country-level comparative advantages. The worker-level comparative advantage across sectors and occupations determines both the direction and the magnitude of the effect of trade on labor market outcomes. I also find that trade liberalization during 2000–2007 significantly contributed to the decline in manufacturing employment and job polarization in high-income countries. In addition, the model shows that the China effect measured by a decline in trade costs with China and an increase in China's manufacturing productivity during 2000–2007 increased inequality in most countries.

Keywords: Trade; Worker heterogeneity; Inequality; Skill premium; Occupational choice; Labor reallocation (search for similar items in EconPapers)
JEL-codes: C68 D33 F16 F66 J24 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199620300283
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:125:y:2020:i:c:s0022199620300283

DOI: 10.1016/j.jinteco.2020.103310

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().