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Market Entry Costs, Underemployment and International Trade

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  • Spiros Bougheas
  • Raymond Riezman

Abstract

We develop a small, open economy, two-sector model with heterogeneous agents and endogenous participation in a labor matching market. We analyze the implications of asymmetric market entry costs for the patterns of international trade and underemployment. Furthermore, we examine the welfare implications of trade liberalization and find that under certain conditions the patterns of trade are not optimal. We also examine the robustness of our results when we allow for complementarities in the production function and for alternative matching mechanisms.

Suggested Citation

  • Spiros Bougheas & Raymond Riezman, 2010. "Market Entry Costs, Underemployment and International Trade," Discussion Papers 10/18, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:10/18
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    References listed on IDEAS

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    2. Davidson, Carl & Sly, Nicholas, 2014. "A simple model of globalization, schooling and skill acquisition," European Economic Review, Elsevier, vol. 71(C), pages 209-227.

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    More about this item

    Keywords

    Entry Costs; Patterns of Trade; Underemployment.;
    All these keywords.

    JEL classification:

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

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