Inheritance, Search Friction and International Trade: A General Equilibrium Model

Debojyoti Mazumder

MPRA Paper from University Library of Munich, Germany

Abstract: In a general equilibrium framework, an economy, with one non-traded final good and two traded intermediate goods, is modeled in this paper. It is shown that even if the economy consists of one frictionless labor market and a labor market with the search-friction, a status-conscious preference can yield unemployment in equilibrium. If such an economy opens up to trade then comparative advantage can be generated through the difference in the degree of the labor market imperfection even between two otherwise very similar countries. This setup rejects the possibility of complete specialization. Wage inequality persists within the country, for both home and foreign, in spite of free trade and, free trade does not guarantee the reduction of unemployment.

Keywords: Trade; Search Unemployment; Inheritance Distribution (search for similar items in EconPapers)
JEL-codes: E24 F10 F11 F16 J64 (search for similar items in EconPapers)
Date: 2013-12-28
New Economics Papers: this item is included in nep-dge, nep-int and nep-mac
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https://mpra.ub.uni-muenchen.de/57002/1/MPRA_paper_57002.pdf revised version (application/pdf)

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