Inequality and Unemployment in a Global Economy

Elhanan Helpman, Oleg Itskhoki and Stephen James Redding

No 7353, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper develops a new framework for examining the distributional consequences of international trade that incorporates firm and worker heterogeneity, search and matching frictions in the labor market, and screening of workers by firms. Larger firms pay higher wages and exporters pay higher wages 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 larger in a trade equilibrium than in autarky, reductions of trade impediments can either raise or reduce wage inequality.

Keywords: International Trade; Risk; Unemployment; Wage Inequality (search for similar items in EconPapers)
JEL-codes: E24 F12 F16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int, nep-lab, nep-ltv and nep-mac
Date: 2009-07

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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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