DP9341 Heterogeneous Workers and International Trade

Author(s): Gene M. Grossman
Publication Date: February 2013
Keyword(s): heterogeneous labor, international trade, matching, productivity, sorting, wage distribution
JEL(s): F11, F16
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9341

In this paper, I survey the recent theoretical literature that incorporates heterogeneous labor into models of international trade. The models with heterogeneous labor have been used to study how talent dispersion can be a source of comparative advantage, how the opening of trade affects the full distribution of wages, and how trade affects industry productivity and efficiency via its impact on sorting and matching in the labor market. Some of the most recent contributions also introduce labor market frictions to study the effects of trade on structural unemployment and on mismatch between workers and firms.