Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/125667
Authors: 
Lechthaler, Wolfgang
Mileva, Mariya
Year of Publication: 
2013
Series/Report no.: 
WWWforEurope Working Paper 12
Abstract: 
We develop a dynamic trade model with comparative advantage, heterogeneous firms and workers and endogenous firm entry to study wage inequality during the adjustment to trade liberalization. We find that trade liberalization increases wage inequality both in the short run and in the long run. In the short run, wage inequality is mainly driven by inter-sectoral wage inequality, while in the long run, wage inequality is driven by an increase in the skill premium. It is not a good idea to exclude certain sectors from trade liberalization, because that greatly reduces the benefits of trade liberalization, while failing to protect vulnerable workers.
Subjects: 
Trade liberalization
wage inequality
adjustment dynamics
JEL: 
E24
F11
F16
J62
Document Type: 
Working Paper
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