Heterogeneous Workers, Trade, and Migration

51 Pages Posted: 18 Sep 2013

See all articles by Inga Heiland

Inga Heiland

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Wilhelm Kohler

University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 18, 2013

Abstract

We argue that the narrative of variety-induced gains from trade in differentiated goods needs revision. If producing differentiated varieties of a good requires differentiated skills and if the work force is heterogeneous in these skills, then firms are likely to have monopsony power. We show that trade then has adverse labor market effects: It increases the monopsony power of firms and worsens the average quality of matches between firms and workers. We also show that international migration has the opposite beneficial effects. Our model can explain two-way migration among similar countries, a pattern that features prominently in migration data.

Keywords: two-way migration, gains from trade, heterogeneous workers

JEL Classification: F120, F160, F220, J240

Suggested Citation

Heiland, Inga and Kohler, Wilhelm K., Heterogeneous Workers, Trade, and Migration (September 18, 2013). CESifo Working Paper Series No. 4387, Available at SSRN: https://ssrn.com/abstract=2327433 or http://dx.doi.org/10.2139/ssrn.2327433

Inga Heiland

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Wilhelm K. Kohler (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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