FIRM HETEROGENEITY AND THE LABOR MARKET EFFECTS OF TRADE LIBERALIZATION* |
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| Authors: | Hartmut Egger Udo Kreickemeier |
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| Affiliation: | 1. University of Bayreuth, CESifo, Germany, GEP, U.K;2. University of Nottingham, U.K., CESifo, Germany, GEP, U.K.;3. We thank Andrew Bernard, Josef Falkinger, Rod Falvey, Marc Melitz, Doug Nelson, James Tybout, two anonymous referees, as well as participants at the CAG Workshop on Locations, Regions and Global Competition, the CESifo Area Conference on Global Economy, the European Research Workshop on International Trade (ERWIT) in Vienna, the ETSG Annual Conference in Vienna, the GEP Workshop on Frontiers in International Trade, the G?ttingen Workshop in International Economics, the Midwest International Economics Meeting at Purdue University in West Lafayette, the Royal Economic Society Meeting at the University of Warwick, the Zeuthen Workshop on International Trade and Investment at the University of Copenhagen, and seminar participants at RWTH Aachen University, the University of Cyprus, the University of Konstanz, the University of Kiel, the University of Tübingen, and the Vienna University of Economics and Business Administration for helpful comments. Kreickemeier gratefully acknowledges financial support from The Leverhulme Trust under Programme Grant F114/BF. Please address correspondence to: Haertmut Egger, Department of Law and Economics, University of Bayreuth, Universitaetsstr. 30, 95447 Bayreuth, Germany. Phone: +49 (0)921 55 2906. Fax: +49 (0)921 55 842905. E‐mail: . |
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| Abstract: | This article develops a model that incorporates workers' fair wage preferences into a general equilibrium framework with heterogeneous firms. In a setting where the wage considered to be fair by workers depends on the productivity of the firm they are working in, we study the determinants of profits, involuntary unemployment and within‐group wage inequality. We use this model to investigate the effects of globalization, thereby pointing to distributional conflicts that have so far not been accounted for: a simultaneous increase of average profits and involuntary unemployment as well as a surge in within‐group wage inequality. |
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