Trade and inequality: from theory to estimation

Elhanan Helpman, Oleg Itskhoki, Marc-Andreas Muendler and Stephen Redding

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and sectors, more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and sectors. Using linked employer-employee data for Brazil, we show that much of overall wage inequality arises within sector-occupations and for workers with similar observable characteristics; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to firm employment size and trade participation. We then extend the heterogenous-firm model of trade and inequality from Helpman, Itskhoki, and Redding (2010) and structurally estimate it with Brazilian data. We show that the estimated model fits the data well, both in terms of key moments as well as in terms of the overall distributions of wages and employment, and find that international trade is important for this fit. In the estimated model, reductions in trade costs have a sizeable effect on wage inequality.

Keywords: wage inequality; international trade (search for similar items in EconPapers)
JEL-codes: E24 F12 F16 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2012-04-25
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/121938/ Open access version. (application/pdf)

Related works:
Journal Article: Trade and Inequality: From Theory to Estimation (2017)
Working Paper: Trade and Inequality: From Theory to Estimation (2012)
Working Paper: Trade and Inequality: From Theory to Estimation (2012)
Working Paper: Trade and Inequality: From Theory to Estimation (2012)
Working Paper: Trade and Inequality: From Theory to Estimation
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:ehl:lserod:121938

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().