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Title:Firm heterogeneity and the labour market effects of trade liberalisation PDF Logo
Authors:Egger, Hartmut
Kreickemeier, Udo
Issue Date:2007
Series/Report no.:CESifo working paper 2000
Abstract:This paper develops a model that incorporates workers’ fair wage preferences into a general equilibrium framework with monopolistic competition between heterogeneous firms à la Melitz (2003). By assuming that the wage considered to be fair by workers depends on the productivity and thus the economic success of the firm they are working in, we can study the determinants of profits, involuntary unemployment and within-group wage inequality in a unified framework. We use this model to investigate the effects of globalisation. In a benchmark case with identical costs of entering domestic and foreign markets, there are gains from trade accompanied by distributional conflicts, which have so far not been accounted for in the literature: a simultaneous increase of average profits and involuntary unemployment as well as a surge in within-group wage inequality.
JEL:F12
F15
F16
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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