Globalization, Worker Mobility and Wage Inequality

24 Pages Posted: 4 Jan 2017

See all articles by Damir Stijepic

Damir Stijepic

Johannes Gutenberg University Mainz

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Date Written: February 2017

Abstract

In the present paper, I integrate frictional labor markets with on‐the‐job search into an otherwise standard heterogeneous firm model of intra‐industry trade. Most importantly, I show that the returns to workers' inter‐firm mobility are higher in a trade equilibrium than in autarky. Intuitively, by favoring large and productive firms, international trade amplifies the disparities in profitability between small and large firms. Hence, the returns to labor reallocation across firms rise. In view of the empirically observed higher inter‐firm mobility among high‐skill workers, this suggests a skill‐biased impact of trade liberalization.

Suggested Citation

Stijepic, Damir, Globalization, Worker Mobility and Wage Inequality (February 2017). Review of International Economics, Vol. 25, Issue 1, pp. 108-131, 2017, Available at SSRN: https://ssrn.com/abstract=2893389 or http://dx.doi.org/10.1111/roie.12258

Damir Stijepic (Contact Author)

Johannes Gutenberg University Mainz ( email )

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Mainz, 55128
Germany

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