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Trade, wages, and productivity

Kristian Behrens (), Giordano Mion (), Yasusada Murata and Jens Südekum
Authors registered in the RePEc Author Service: Jens Suedekum ()

No 7369, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a new general equilibrium model of monopolistic competition with heterogeneous firms, variable demand elasticity and multiple asymmetric regions, in which trade integration induces wage and productivity changes. Using Canada-US interregional trade data, we structurally estimate a theory-based gravity equation system featuring endogenous wages and productivity. Given the estimated parameter values, we first decompose ‘border effects’ into a ‘pure’ border effect, relative and absolute wage effects, and a selection effect. We then quantify the impacts of removing the trade distortions generated by the Canada-US border on regional market aggregates such as wages, productivity, markups, the mass of varieties produced and consumed, as well as welfare. Last, we extend the counterfactual analysis to the firm level by generating productivity distributions and their changes via simulation.

Keywords: counterfactual analysis; endogenous markups; firm heterogeneity; general equilibrium; gravity equation system; monopolistic competition (search for similar items in EconPapers)
JEL-codes: F12 F15 F17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2009-07
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Journal Article: TRADE, WAGES, AND PRODUCTIVITY (2014) Downloads
Working Paper: Trade, Wages, and Productivity (2012) Downloads
Working Paper: Trade, Wages and Productivity (2009) Downloads
Working Paper: Trade, Wages and Productivity (2009) Downloads
Working Paper: Trade, wages and productivity (2009) Downloads
Working Paper: Trade, wages and productivity (2009) Downloads
Working Paper: Trade, Wages, and Productivity (2008) Downloads
Working Paper: Trade, Wages, and Productivity (2008) Downloads
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