Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282337 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10649
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
What are the pro-competitive consequences of trade in frictional labor markets? This paper develops and estimates a dynamic general equilibrium trade model to show that the interplay between endogenously variable markups in product markets and frictions in labor markets has important implications for aggregate as well as distributional consequences of trade. In particular, I show that once markups are allowed to respond to trade liberalization, unemployment and residual wage inequality rise almost three times more than in a model with constant markups (in the steady state). The presence of labor market frictions makes the pro-competitive gains from trade liberalization negative.
Subjects: 
international trade
variable markups
pro-competitive gains
labor elasticity of revenue
unemployment
residual wage inequality
firm size distribution
JEL: 
F12
F16
E24
J64
L11
Document Type: 
Working Paper
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