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Trade, Wages, and Productivity

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

Cahiers de recherche from CIRPEE

Abstract: We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate productivity. Since wage and productivity responses are endogenous, our model is well suited to study the impacts of trade integration on aggregate productivity and factor prices. Using Canada-U.S. interregional trade data, we first estimate a system of theory-based gravity equations under the general equilibrium constraints generated by the model. Doing so allows us to measure "border effects" and to decompose them into a "pure" border effect, relative and absolute wage effects, and a selection effect. Using the estimated parameter values, we then quantify the impacts of removing the Canada-U.S. border on wages, productivity, markups, the share of exporters, the mass of varieties produced and consumed, and welfare. We finally provide a similar quantification with respect to regional population changes.

Keywords: Heterogeneous firms; gravity equations; general equilibrium; monopolistic competition; variable demand elasticities (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-bec, nep-eff, nep-int and nep-lab
Date: 2008
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http://www.cirpee.org/fileadmin/documents/Cahiers_2008/CIRPEE08-26.pdf (application/pdf)

Related works:
Journal Article: TRADE, WAGES, AND PRODUCTIVITY (2014) 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 (2009) Downloads
Working Paper: Trade, Wages, and Productivity (2008) Downloads
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