Abstract for:

Inequality and Unemployment in a Global Economy

Elhanan  Helpman,  Oleg  Itskhoki,  Stephen  Redding,  July 2009
Paper No' CEPDP0940: | Full paper

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Keywords: Wage Inequality; International Trade, Risk, Unemployment

JEL Classification: F12; F16; E24

Is hard copy/paper copy available? YES - Paper Copy Still In Print.

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This Paper is published under the following series: CEP Discussion Papers

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Abstract:

This paper develops a new framework for examining the distributional consequences of international trade that incorporates firm and worker heterogeneity, search and matching frictions in the labor market, and screening of workers by firms. Larger firms pay higher wages and exporters pay higher wages than non-exporters. The opening of trade enhances wage inequality and raises unemployment, but expected welfare gains are ensured if workers are risk neutral. And while wage inequality is larger in a trade equilibrium than in autarky, reductions of trade impediments can either raise or reduce wage inequality.