Inequality and International Trade: The Role of Skill-Biased Technology and Search Frictions

Moritz Ritter

No 1204, DETU Working Papers from Department of Economics, Temple University

Abstract: A competitive search model of the labor market is embedded into a small open economy with firm and worker heterogeneity. Search frictions generate equilibrium unemployment and income inequality between identical workers, in addition to income differences between skill groups. Numerical simulations of the model reveal that an increase in trade is likely to increase within-group inequality and decrease unemployment, while the effect on the skill premium is ambiguous. Overall the effect of trade on the labor market is minor if only a small fraction of the labor force is employed in exporting and import-competing industries.

Keywords: Directed Search; Inequality; International Trade (search for similar items in EconPapers)
JEL-codes: E25 F16 J64 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-dge and nep-mac
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http://www.cla.temple.edu/RePEc/documents/detu_2012_04.pdf First Version, 2012 (application/pdf)

Related works:
Journal Article: INEQUALITY AND INTERNATIONAL TRADE: THE ROLE OF SKILL-BIASED TECHNOLOGY AND SEARCH FRICTIONS (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tem:wpaper:1204

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