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Trade, wages and productivity

Behrens, K, Mion, G, Murata, Y and Südekum, J (2009) Trade, wages and productivity .

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We develop a new general equilibrium model of monopolistic competition with heterogeneous firms, variable demand elasticity and multiple asymmetric regions, in which trade integration induces wage and productivity changes. Using Canada-US interregional trade data, we structurally estimate a theory-based gravity equation system featuring endogenous wages and productivity. Given the estimated parameter values, we first decompose border effects into a pure border effect, relative and absolute wage effects, and a selection effect. We then quantify the impacts of removing the trade distortions generated by the Canada-US border on regional market aggregates such as wages, productivity, markups, the mass of varieties produced and consumed, as well as welfare. Last, we extend the counterfactual analysis to the firm level by generating productivity distributions and their changes via simulation.

Item Type: Other
Authors :
Date : 2009
Uncontrolled Keywords : F15, F17, F12, firm heterogeneity, monopolistic competition, general equilibrium, endogenous markups, gravity equation system, counterfactual analysis
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:33
Last Modified : 16 May 2017 15:33

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