Kiel Working Papers, Kiel Institute for World Economics
No 1538:
Comparative Advantage and Skill-specific Unemployment
Mario Larch and Wolfgang Lechthaler
Abstract: We introduce unemployment and endogenous selection of
workers into different skill-classes in a trade model with two sectors and
heterogeneous firms. This allows us to study the distributional
consequences and the skill-specific unemployment effects of trade
liberalization. We show that the gains from trade will be distributed very
unequally. While unskilled workers loose in terms of real wages and
employment levels in the skilled labor intensive sector, skilled workers
loose in terms of real wages and unemployment levels in the unskilled labor
intensive sector. However, the inequality of workers between sectors is
much larger for skilled labor than for unskilled labor. On average,
unemployment among unskilled workers increases when a skill-abundant
country opens up to trade
Keywords: Comparative advantage; heterogeneous firms; labor market frictions; unemployment; trade liberalization; (follow links to similar papers)
JEL-Codes: F11,; F12,; F16,; J64,; L11; (follow links to similar papers)
45 pages, August 2009
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