Inequality and Unemployment in a Global Economy
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CitationHelpman, Elhanan, Oleg Itskhoki, and Stephen Redding. 2010. Inequality and unemployment in a global economy. Econometrica 78: 1239–1283. doi: 10.3982/ECTA8640
AbstractThis paper develops a new framework for examining the determinants of wage distributions that emphasizes within-industry reallocation, labor market frictions, and differences in workforce composition across firms. More productive firms pay higher wages and exporting increases the wage paid by a firm with a given productivity. The opening of trade enhances wage inequality and can either raise or reduce unemployment. While wage inequality is higher in a trade equilibrium than in autarky, gradual trade liberalization first increases and later decreases inequality.
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