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Globalization and firm level adjustment with imperfect labor markets

Carl Davidson (), Steven Matusz () and Andrei Shevchenko

Journal of International Economics, 2008, vol. 75, issue 2, 295-309

Abstract: In a model with search generated unemployment and heterogeneity on both sides of the labor market, exporting firms are bigger and pay higher wages than other firms. Moreover, there is imperfect persistence in the decision to export and liberalization increases the wage gap between high- and low-skill workers. Openness can increase aggregate productivity in export-oriented markets while generating within-firm productivity losses for the weakest firms. In contrast, openness can lead to within-firm productivity gains for the weakest firms in import-competing industries.

Date: 2008
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