Heterogeneous Workers, Trade, and Migration

Arbeitspapier

We develop a model that combines monopolistic competition on goods markets with skill-type heterogeneity on the labor market to analyze the effects of trade and migration on welfare and inequality. Skill-type heterogeneity and partial specificity to firms’ endogenously chosen skill requirements lead to endogenous worker-firm match quality, endogenous wage markups, and within-firm wage inequality. We identify novel effects of trade and migration. Trade enhances firms’ monopsony power on the labor market and worsens the average quality of worker-firm matches, but the gains from trade theorem survives. Integration of labor markets leads to two-way migration between symmetric countries. Migration enhances competitiveness on the labor market and tends to increase the average quality of worker-firm matches. Trade and migration are complements. Our model clearly advocates opening up labor markets simultaneously with trade liberalization.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7355

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Trade and Labor Market Interactions ; International Migration ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Subject: two-way migration ; gains from trade ; heterogeneous workers

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Heiland, Inga ; Kohler, Wilhelm
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/185553
• Last update: 10.03.2025, 11:44 AM CET