IDEAS home Printed from https://ideas.repec.org/a/wly/canjec/v51y2018i2p452-482.html
   My bibliography  Save this article

On‐the‐job‐search, wage dispersion and trade liberalization

Author

Listed:
  • Joel Rodrigue
  • Kunio Tsuyuhara

Abstract

This paper builds a dynamic, general equilibrium, open economy model that allows for ex ante homogeneous workers to experience different wage growth before and after trade liberalization. Key features of our model include a product market composed of heterogeneous firms and a labour market characterized by directed, on‐the‐job‐search and dynamic contracts. We characterize the complementarity of these two sources of wage dispersion in an open economy setting where trade liberalization affects the endogenous equilibrium set of producers and the structure of wages. We find that worker job‐to‐job transitions, through on‐the‐job search, increases the impact of trade liberalization on wage dispersion by 4%. Résumé Recherche d’emploi en cours d’emploi, dispersion des salaires et libéralisation du commerce. Ce mémoire construit un modèle dynamique d’équilibre général d’une économie ouverte qui permet à des travailleurs ex ante homogènes de faire l’expérience de croissance différente des salaires avant et après la libéralisation du commerce. Les caractéristiques importantes du modèle incluent un marché du produit composé de firmes hétérogènes et un marché du travail caractérisé par une recherche dirigée d’emploi en cours d’emploi et des contrats de salaires dynamiques. On caractérise la complémentarité de ces deux sources de dispersion des salaires dans une économie ouverte où la libéralisation du commerce affecte l’équilibre endogène de l’ensemble des producteurs et la structure des salaires. On découvre que les transitions d’emploi à emploi des travailleurs, via la recherche d’emploi en cours d’emploi, accroîssent l’impact de la libéralisation du commerce sur la dispersion des salaires de 4 %.

Suggested Citation

  • Joel Rodrigue & Kunio Tsuyuhara, 2018. "On‐the‐job‐search, wage dispersion and trade liberalization," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(2), pages 452-482, May.
  • Handle: RePEc:wly:canjec:v:51:y:2018:i:2:p:452-482
    DOI: 10.1111/caje.12327
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/caje.12327
    Download Restriction: no

    File URL: https://libkey.io/10.1111/caje.12327?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    3. Moritz Ritter, 2015. "Trade and inequality in a directed search model with firm and worker heterogeneity," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(5), pages 1902-1916, December.
    4. Menzio, Guido & Shi, Shouyong, 2010. "Block recursive equilibria for stochastic models of search on the job," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1453-1494, July.
    5. Moritz Ritter, 2014. "Offshoring and occupational specificity of human capital," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 780-798, October.
    6. Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 468-510.
    7. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    8. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    9. Wacziarg, Romain & Wallack, Jessica Seddon, 2004. "Trade liberalization and intersectoral labor movements," Journal of International Economics, Elsevier, vol. 64(2), pages 411-439, December.
    10. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    11. Burdett, Ken & Coles, Melvyn, 2010. "Wage/tenure contracts with heterogeneous firms," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1408-1435, July.
    12. Kunio Tsuyuhara, 2016. "Dynamic Contracts With Worker Mobility Via Directed On‐The‐Job Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 1405-1424, November.
    13. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2017. "Trade and Inequality: From Theory to Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 357-405.
    14. Michael Waugh & Ina Simonovska, 2012. "Different Trade Models, Different Trade Elasticities?," 2012 Meeting Papers 618, Society for Economic Dynamics.
    15. Elhanan Helpman & Oleg Itskhoki, 2010. "Labour Market Rigidities, Trade and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(3), pages 1100-1137.
    16. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8grh35j2 is not listed on IDEAS
    17. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-2898, December.
    18. Kim J. Ruhl & Jonathan L. Willis, 2017. "New Exporter Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 703-726, August.
    19. Ian King & Frank Stähler, 2014. "International trade and directed search unemployment in general equilibrium," Canadian Journal of Economics, Canadian Economics Association, vol. 47(2), pages 580-604, May.
    20. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1051-1099.
    21. Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-388, May.
    22. Tamas Papp, 2013. "Frictional wage dispersion with Bertrand competition: an assessment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 540-552, July.
    23. repec:oup:restud:v:84:y::i:1:p:357-405. is not listed on IDEAS
    24. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(1), pages 31-66.
    25. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Post-Print hal-03458567, HAL.
    26. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    27. Erhan Artuç & Shubham Chaudhuri & John McLaren, 2010. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," American Economic Review, American Economic Association, vol. 100(3), pages 1008-1045, June.
    28. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1267-1293, December.
    29. Davis, Donald R. & Harrigan, James, 2011. "Good jobs, bad jobs, and trade liberalization," Journal of International Economics, Elsevier, vol. 84(1), pages 26-36, May.
    30. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    31. Mary Amiti & Donald R. Davis, 2012. "Trade, Firms, and Wages: Theory and Evidence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(1), pages 1-36.
    32. Rafael Dix‐Carneiro, 2014. "Trade Liberalization and Labor Market Dynamics," Econometrica, Econometric Society, vol. 82(3), pages 825-885, May.
    33. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
    34. Hosios, Arthur J, 1990. "Factor Market Search and the Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 325-355, April.
    35. Ricardo A. López, 2009. "Do Firms Increase Productivity in Order to Become Exporters?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 621-642, October.
    36. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    37. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms9850c12h1p is not listed on IDEAS
    38. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms985085gkbp is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    2. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
    3. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    4. Gabriel Felbermayr & Giammario Impullitti & Julien Prat, 2018. "Firm Dynamics and Residual Inequality in Open Economies," Journal of the European Economic Association, European Economic Association, vol. 16(5), pages 1476-1539.
    5. Kondo, Illenin O., 2018. "Trade-induced displacements and local labor market adjustments in the U.S," Journal of International Economics, Elsevier, vol. 114(C), pages 180-202.
    6. David H. Autor & David Dorn & Gordon H. Hanson & Jae Song, 2014. "Trade Adjustment: Worker-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1799-1860.
    7. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2017. "Trade and Inequality: From Theory to Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 357-405.
    8. A. Kerem Co?ar & Nezih Guner & James Tybout, 2016. "Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy," American Economic Review, American Economic Association, vol. 106(3), pages 625-663, March.
    9. Heid, Benedikt & Larch, Mario, 2016. "Gravity with unemployment," Journal of International Economics, Elsevier, vol. 101(C), pages 70-85.
    10. Wolfgang Lechthaler & Mariya Mileva, 2019. "Trade liberalization and wage inequality: new insights from a dynamic trade model with heterogeneous firms and comparative advantage," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(3), pages 407-457, August.
    11. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 1-54, Elsevier.
    12. Nunn, Nathan & Trefler, Daniel, 2014. "Domestic Institutions as a Source of Comparative Advantage," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 263-315, Elsevier.
    13. Wolthoff, Ronald P., 2011. "It's About Time: Implications of the Period Length in an Equilibrium Job Search Model," IZA Discussion Papers 6002, Institute of Labor Economics (IZA).
    14. Chaumont, Gaston & Shi, Shouyong, 2022. "Wealth accumulation, on-the-job search and inequality," Journal of Monetary Economics, Elsevier, vol. 128(C), pages 51-71.
    15. Alessandro Ruggieri, 2019. "Trade and labour market institutions: A tale of two liberalizations," Discussion Papers 2019-15, University of Nottingham, GEP.
    16. Mangin, Sephorah, 2017. "A theory of production, matching, and distribution," Journal of Economic Theory, Elsevier, vol. 172(C), pages 376-409.
    17. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-2898, December.
    18. Ornelas, Emanuel, 2012. "Preferential trade agreements and the labor market," LSE Research Online Documents on Economics 121752, London School of Economics and Political Science, LSE Library.
    19. Carlos Carrillo‐Tudela & Ludo Visschers, 2023. "Unemployment and Endogenous Reallocation Over the Business Cycle," Econometrica, Econometric Society, vol. 91(3), pages 1119-1153, May.
    20. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Journal of Economic Theory, Elsevier, vol. 146(1), pages 39-73, January.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:canjec:v:51:y:2018:i:2:p:452-482. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.