Citation

Discussion Paper Details

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Title: Inequality and Unemployment in a Global Economy

Author(s): Elhanan Helpman, Oleg Itskhoki and Stephen J. Redding

Publication Date: July 2009

Keyword(s): International Trade, Risk, Unemployment and Wage Inequality

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Helpman, E, Itskhoki, O and Redding, S. 2009. 'Inequality and Unemployment in a Global Economy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7353