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Labor Markets and Kaleidoscopic Comparative Advantage

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  • Daniel A. Traça

Abstract

This paper addresses the labor market implications of an increase in openness and foreign competition. It develops a model where industry-specific productivity shocks create uncertainty, producing an environment of kaleidoscopic comparative advantage (Bhagwati, 1998). The key assumption is that risk markets are imperfect, as wage-contracts are subject to uninsurable bankruptcy risk. In this context, the paper analyzes the consequences for wage levels, wage volatility, job-instability and income distribution, of the openness of previously non-traded industries to the forces of international trade and foreign competition.

Suggested Citation

  • Daniel A. Traça, 2000. "Labor Markets and Kaleidoscopic Comparative Advantage," Working Papers w200004, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w200004
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp200004.pdf
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    References listed on IDEAS

    as
    1. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Working Papers 761, Princeton University, Department of Economics, Industrial Relations Section..
    2. Daniel A. Traca, 2005. "Trade Exposure, Export Intensity, and Wage Volatility: Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 336-347, May.
    3. Marianne Bertrand, 2004. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 723-766, October.
    4. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    5. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 55-142.
    6. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Working Papers 761, Princeton University, Department of Economics, Industrial Relations Section..
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    Cited by:

    1. Don J. Webber & Michael Horswell, 2009. "Winners and Losers: Spatial variations in labour productivity in England and Wales," Working Papers 0912, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.

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    More about this item

    JEL classification:

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

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