Working Paper: NBER ID: w15764
Authors: Elhanan Helpman
Abstract: Recent research has emphasized firm heterogeneity as a source of comparative advantage. Combining this approach with labor market frictions and worker heterogeneity provides a framework for studying the impact of trade on unemployment and inequality. This paper reviews this approach and reports a number of results from recent studies.
Keywords: labor market frictions; comparative advantage; unemployment; inequality; trade
JEL Codes: F12; F16; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor market frictions in one country (F16) | trade dynamics in another country (F10) |
| Labor market frictions in one country (F16) | unemployment in another country (J68) |
| Decline in labor market frictions in one country (F66) | increase in total factor productivity in that country (O49) |
| Decline in labor market frictions in one country (F66) | negative productivity shock in its trading partner (F41) |
| Removing trade impediments (F13) | differential impacts on countries with varying labor market frictions (F66) |
| Lower hiring costs in the differentiated sector (J39) | increased exports (F10) |
| Trade dynamics (F14) | inequality (D63) |
| Trade dynamics (F14) | unemployment (J64) |
| Trade can raise unemployment levels (F66) | increases overall welfare (D69) |