Premium
TRADE, WAGES, AND PRODUCTIVITY
Author(s) -
Behrens Kristian,
Mion Giordano,
Murata Yasusada,
Südekum Jens
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12091
Subject(s) - monopolistic competition , productivity , economics , welfare , consumption (sociology) , competition (biology) , general equilibrium theory , diversity (politics) , international economics , microeconomics , monopoly , macroeconomics , market economy , ecology , social science , sociology , biology , anthropology
We develop a general equilibrium monopolistic competition model in which wages, productivity, consumption diversity, and markups respond to trade integration. We structurally estimate the model and simulate the impacts of removing all trade barriers generated by the Canada–U.S. border. Firm selection gets tougher by 8.09% in Canada and by 0.80% in the United States. Markups that consumers face, which are central to welfare, fall by up to 12.11% in Canadian provinces and by up to 2.82% in U.S. states. However, changes in markups measured at the firm level are ambiguous, thus providing a different piece of information.