Trade, Wages, and Productivity

Behrens, Kristian; Mion, Giordano; Murata, Yasusada; Suedekum, Jens

doi:10.1111/iere.12091

Trade, Wages, and Productivity

International Economic Review, Vol. 55, Issue 4, pp. 1305-1348, 2014

44 Pages Posted: 29 Oct 2014

See all articles by Kristian Behrens

Kristian Behrens

University of Quebec at Montreal (UQAM) - Department of Economics

University of Sussex - Department of Economics; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Yasusada Murata

Nihon University - Advanced Research Institute for the Sciences and Humanities

Jens Suedekum

Heinrich-Heine-University Duesseldorf, Duesseldorf Institute for Competition Economics (DICE); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)

There are 4 versions of this paper

Date Written: November 2014

Abstract

We develop a general equilibrium monopolistic competition model in which wages, productivity, consumption diversity, and markups respond to trade integration. We structurally estimate the model and simulate the impacts of removing all trade barriers generated by the Canada–U.S. border. Firm selection gets tougher by 8.09% in Canada and by 0.80% in the United States. Markups that consumers face, which are central to welfare, fall by up to 12.11% in Canadian provinces and by up to 2.82% in U.S. states. However, changes in markups measured at the firm level are ambiguous, thus providing a different piece of information.

Suggested Citation: Suggested Citation

Behrens, Kristian and Mion, Giordano and Murata, Yasusada and Südekum, Jens, Trade, Wages, and Productivity (November 2014). International Economic Review, Vol. 55, Issue 4, pp. 1305-1348, 2014, Available at SSRN: https://ssrn.com/abstract=2516106 or http://dx.doi.org/10.1111/iere.12091