Labor Markets and Kaleidoscopic Comparative Advantage

Daniel Traca

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: This paper addresses the labor market implications of an increase in openness and foreign competition. It develops a model where industry-specific productivity shocks create uncertainty, producing an environment of kaleidoscopic comparative advantage (Bhagwati, 1998). The key assumption is that risk markets are imperfect, as wage-contracts are subject to uninsurable bankruptcy risk. In this context, the paper analyzes the consequences for wage levels, wage volatility, job-instability and income distribution, of the openness of previously non-traded industries to the forces of international trade and foreign competition.

JEL-codes: F16 (search for similar items in EconPapers)
Date: 2000
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Related works:
Journal Article: Labor Markets and Kaleidoscopic Comparative Advantage (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w200004

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