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Trade between symmetric countries, heterogeneous firms, and the skill premium

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  • Gonzague Vannoorenberghe

Abstract

This paper examines the effects of trade liberalization between symmetric countries on the skill premium. I introduce skilled and unskilled labour in a model of trade with heterogeneous firms à la Melitz (2003) and assume a production technology such that more productive firms are more skill intensive. I show that the effects of trade liberalization on wage inequality crucially depend on the type of trade costs considered and on their initial size. While fixed costs of trade have a potentially non‐monotonic effect on the skill premium, a drop in variable trade costs unambiguously and substantially raises wage inequality. Ce mémoire examine les effets de la libéralisation du commerce entre pays symétriques sur la prime à l'habileté. On introduit du travail qualifié et non qualifié dans un modèle de commerce avec des firmes hétérogènes à la Melitz (2003), et on postule l'existence d'une technologie de production telle que les firmes plus productives ont une intensité plus grande d'utilisation des habilités. On montre que les effets de la libéralisation du commerce sur l'inégalité des salaires dépendent de manière cruciale du type de coûts du commerce pris en compte et de leur taille initiale. Alors que les coûts fixes du commerce ont un effet potentiellement non‐monotone sur la prime aux habiletés, une chute dans les coûts variables du commerce augmente substantiellement et sans ambiguïté l'inégalité des salaires.

Suggested Citation

  • Gonzague Vannoorenberghe, 2011. "Trade between symmetric countries, heterogeneous firms, and the skill premium," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(1), pages 148-170, February.
  • Handle: RePEc:wly:canjec:v:44:y:2011:i:1:p:148-170
    DOI: 10.1111/j.1540-5982.2010.01627.x
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    Cited by:

    1. Crozet, Matthieu & Trionfetti, Federico, 2013. "Firm-level comparative advantage," Journal of International Economics, Elsevier, vol. 91(2), pages 321-328.
    2. Julian Emami Namini & Ricardo A. López, 2013. "Factor price overshooting with trade liberalization: theory and evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(2), pages 139-181, May.
    3. Kasahara, Hiroyuki & Liang, Yawen & Rodrigue, Joel, 2016. "Does importing intermediates increase the demand for skilled workers? Plant-level evidence from Indonesia," Journal of International Economics, Elsevier, vol. 102(C), pages 242-261.
    4. Emami Namini, Julian & Facchini, Giovanni & López, Ricardo A., 2013. "Export growth and firm survival," Economics Letters, Elsevier, vol. 120(3), pages 481-486.
    5. Li, Huijuan & Cai, Weihong & Li, Wenxiu, 2021. "Does global value chains participation improve skill premium? Mediating role of skill-biased technological change," Economic Modelling, Elsevier, vol. 99(C).
    6. James Harrigan & Ariell Reshef, 2015. "Skill-biased heterogeneous firms, trade liberalization and the skill premium," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 1024-1066, August.
    7. Catia Montagna & Antonella Nocco, 2012. "Trade Costs, International Competition and Selection: The Effects of Unionisation on Market Size," Dundee Discussion Papers in Economics 269, Economic Studies, University of Dundee.
    8. Engelmann, Sabine, 2011. "Trade liberalisation, technical change and skill-specific unemployment," IAB-Discussion Paper 201119, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    9. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
    10. Mauro Caselli, 2014. "Trade, skill-biased technical change and wages in Mexican manufacturing," Applied Economics, Taylor & Francis Journals, vol. 46(3), pages 336-348, January.

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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