Trade liberalization and wage inequality: new insights from a dynamic trade model with heterogeneous firms and comparative advantage

Artikel

We develop a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to study wage inequality during the adjustment after trade liberalization and potential policy responses to reduce wage inequality. In the short run, inter-sectoral wage inequality is high but then recedes as more and more workers move to the expanding exporting sector. The skill premium does not change much in the short run but increases substantially in the medium and long run. Training subsidies are more powerful than sector-migration subsidies in reducing the wage inequality induced by trade liberalization.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Review of World Economics ; ISSN: 1610-2886 ; Volume: 155 ; Year: 2019 ; Issue: 3 ; Pages: 407-457 ; Heidelberg: Springer

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Neoclassical Models of Trade ; Trade and Labor Market Interactions ; Job, Occupational, and Intergenerational Mobility; Promotion
• Subject: trade liberalization ; wage inequality ; adjustment dynamics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lechthaler, Wolfgang ; Mileva, Mariya
• Event: Veröffentlichung
• (who): Springer ; ZBW - Leibniz Information Centre for Economics
• (where): Heidelberg
• (when): 2019

Further information

• DOI: doi:10.1007/s10290-019-00347-0
• Handle: http://hdl.handle.net/10419/266159
• Last update: 10.03.2025, 11:45 AM CET