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Heterogeneous Workers, Trade, and Migration

Inga Heiland () and Wilhelm Kohler

No 7355, CESifo Working Paper Series from CESifo

Abstract: We analyze the welfare effects of trade and migration, focusing on two-sided horizontal heterogeneity among workers and firms. We prove the existence of a unique symmetric equilibrium in a two stage game of firm entry (including choice of skill-types) and pricing, involving monopsony power on the labor market and endogenous goods price markups. Trade increases wage markups and worsens the average quality worker-firm matches as well as raising within-firm wage inequality. In contrast, migration lowers wage markups and tends to improve the average matching quality. Our model advocates opening up labor markets simultaneously with trade liberalization.

Keywords: two-way migration; gains from trade; heterogeneous workers (search for similar items in EconPapers)
JEL-codes: F12 F16 F22 J24 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-int, nep-lma and nep-mig
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Working Paper: Heterogeneous Workers, Trade, and Migration (2013) Downloads
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