Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284743 
Year of Publication: 
2021
Citation: 
[Journal:] The World Economy [ISSN:] 1467-9701 [Volume:] 45 [Issue:] 1 [Year:] 2021 [Pages:] 136-175
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
Convex vacancy creation costs shape firms’ responses to trade liberalisation. They induce capacity constraints by increasing firms’ costs of production. A profit maximising firm will therefore not fully meet the increased foreign demand, but serve only a few export markets. More productive firms will export to more countries and profit more from trade liberalisation. To get an effect of trade liberalisation on wage inequality, we need on‐the‐job search and convex vacancy creation costs because with linear costs trade liberalisation affects all wages in equal proportion. Furthermore, with convex vacancy creation costs, not all firms export to all foreign markets even if trade is fully liberalised. This implies that wage inequality under free trade is always higher than under autarky.
Subjects: 
convex vacancy creation costs
heterogeneous firms
international trade
monopolistic competition
on‐the‐job search
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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