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INEQUALITY AND INTERNATIONAL TRADE: THE ROLE OF SKILL-BIASED TECHNOLOGY AND SEARCH FRICTIONS

Published online by Cambridge University Press:  06 January 2016

Moritz Ritter
Moritz Ritter*
Affiliation:
Temple University
*
Address correspondence to: Moritz Ritter, Department of Economics, Temple University, 1301 Cecil B. Moore Avenue, Philadelphia, PA 19122, USA; e-mail: [email protected].
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Abstract

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I embed a competitive search model of the labor market into a small open economy model with heterogeneous firms and workers. Search frictions generate equilibrium unemployment and income inequality between identical workers, in addition to income differences between skill groups. A quantitative evaluation of the U.S. trade experience suggests that the effect of the increase in goods trade since 1980 may have contributed to the increase in the college premium, but not to the increase in residual inequality.

Keywords

Competitive SearchIncome InequalityInternational TradeSkill-Biased Technology
Type
Articles
Information
Macroeconomic Dynamics , Volume 21 , Issue 3 , April 2017 , pp. 624 - 643
Copyright
Copyright © Cambridge University Press 2016 

Footnotes

Part of the research for this paper was completed while visiting Aarhus University, which I thank for its hospitality.

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