EconPapers    
Economics at your fingertips  
 

Factor Heterogeneity, Factor Market Imperfection and Trade

Yang Seung Lee

International Economic Journal, 2019, vol. 33, issue 1, 170-188

Abstract: This paper develops a tractable model of examining how factor heterogeneity and imperfect factor market interact for determining a pattern of trade. Institution plays a crucial role for the interaction. In my work, firm productivity is defined as a composition of factor productivity and technology. Thus, input selection should affect the pattern of Melitz’s intra-industry allocation due to the incurring transaction cost. For a simple model, I assume two factors (labor and capital) and two sectors, which are relatively less institution-dependent and relatively more institution-dependent. When the economy is open, effect of the transaction cost on income distribution is more drastic for an institutionally underdeveloped country. Depending on institutional quality, the economic openness reallocates resource across countries through job creation or job destruction. The job turnovers redistribute income between heterogeneous labors within countries. The income redistribution is catalyzed by international mobility of capital. As a result, income disparity is widened between the institutionally developed country and the institutionally underdeveloped country. This paper can contribute to the literature of institution and international trade.

Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1080/10168737.2019.1581825 (text/html)
Access to full text is restricted to subscribers.

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:taf:intecj:v:33:y:2019:i:1:p:170-188

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RIEJ20

Access Statistics for this article

International Economic Journal is currently edited by Jaymin Lee Editor

More articles in International Economic Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2019-04-14
Handle: RePEc:taf:intecj:v:33:y:2019:i:1:p:170-188