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FIRM HETEROGENEITY AND THE LABOR MARKET EFFECTS OF TRADE LIBERALIZATION *
Author(s) -
Egger Hartmut,
Kreickemeier Udo
Publication year - 2009
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/j.1468-2354.2008.00527.x
Subject(s) - economics , unemployment , wage inequality , labour economics , wage , productivity , involuntary unemployment , inequality , globalization , efficiency wage , general equilibrium theory , free trade , liberalization , macroeconomics , international economics , market economy , mathematical analysis , mathematics
This article develops a model that incorporates workers' fair wage preferences into a general equilibrium framework with heterogeneous firms. In a setting where the wage considered to be fair by workers depends on the productivity of the firm they are working in, we study the determinants of profits, involuntary unemployment and within‐group wage inequality. We use this model to investigate the effects of globalization, thereby pointing to distributional conflicts that have so far not been accounted for: a simultaneous increase of average profits and involuntary unemployment as well as a surge in within‐group wage inequality.