Behrens, Kristian, Mion, Giordano, Murata, Yasusada and Südekum, Jens (2009) Trade, wages and productivity. CEP Discussion Paper (942). London School of Economics and Political Science. Centre for Economic Performance, London, UK.
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Abstract
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: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://cep.lse.ac.uk/ |
| Additional Information: | © 2009 The authors |
| Divisions: | Centre for Economic Performance |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor |
| JEL classification: | F - International Economics > F1 - Trade > F15 - Economic Integration F - International Economics > F1 - Trade > F17 - Trade Forecasting and Simulation F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies |
| Date Deposited: | 13 Jul 2010 15:30 |
| Last Modified: | 13 Sep 2024 20:12 |
| URI: | http://eprints.lse.ac.uk/id/eprint/28609 |
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