Inequality and Unemployment in a Global Economy

Elhanan Helpman, Oleg Itskhoki and Stephen James Redding

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper develops a new framework for examining the distributional consequences of internationaltrade that incorporates firm and worker heterogeneity, search and matching frictions in the labormarket, and screening of workers by firms. Larger firms pay higher wages and exporters pay higherwages than non-exporters. The opening of trade enhances wage inequality and raises unemployment,but expected welfare gains are ensured if workers are risk neutral. And while wage inequality is largerin a trade equilibrium than in autarky, reductions of trade impediments can either raise or reduce wageinequality.

Keywords: Wage Inequality; International Trade; Risk; Unemployment (search for similar items in EconPapers)
JEL-codes: F12 F16 E24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2009-07
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http://cep.lse.ac.uk/pubs/download/dp0940.pdf (application/pdf)

Related works:
Working Paper: Inequality and Unemployment in a Global Economy (2008)
Working Paper: Inequality and Unemployment in a Global Economy (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:cep:cepdps:dp0940

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