Inequality and unemployment in a global economy

Elhanan Helpman, Oleg Itskhoki, Stephen Redding

Research output: Contribution to journalArticlepeer-review

469 Scopus citations

Abstract

This paper develops a new framework for examining the determinants of wage distributions that emphasizes within-industry reallocation, labor market frictions, and differences in workforce composition across firms. More productive firms pay higher wages and exporting increases the wage paid by a firm with a given productivity. The opening of trade enhances wage inequality and can either raise or reduce unemployment. While wage inequality is higher in a trade equilibrium than in autarky, gradual trade liberalization first increases and later decreases inequality.

Original languageEnglish (US)
Pages (from-to)1239-1283
Number of pages45
JournalEconometrica
Volume78
Issue number4
DOIs
StatePublished - Jul 2010
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • International trade
  • Risk
  • Unemployment
  • Wage inequality

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