Trade and inequality in a directed search model with firm and worker heterogeneity

Moritz Ritter

Canadian Journal of Economics, 2015, vol. 48, issue 5, 1902-1916

Abstract: This paper integrates the insight that exporting firms are typically more productive and employ higher-skilled workers into a directed search model of the labour market. The model generates a skill premium as well as residual wage inequality among identical workers. A trade liberalization increases the skill premium and likely increases residual inequality among high-skilled workers. The calibrated model generates results consistent with the prior literature examining the effect of the Canada-US Free Trade Agreement on the Canadian labour market: a significant decrease in employment in manufacturing, but only a small change in unemployment and wages.

JEL-codes: E24 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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