Working Paper: NBER ID: w18788
Authors: Gene M. Grossman
Abstract: In this paper, I survey the recent theoretical literature that incorporates heterogeneous labor into models of international trade. The models with heterogeneous labor have been used to study how talent dispersion can be a source of comparative advantage, how the opening of trade affects the full distribution of wages, and how trade affects industry productivity and efficiency via its impact on sorting and matching in the labor market. Some of the most recent contributions also introduce labor market frictions to study the effects of trade on structural unemployment and on mismatch between workers and firms.
Keywords: Heterogeneous labor; International trade; Wage distribution; Productivity
JEL Codes: F11; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Talent dispersion (D29) | Comparative advantage (F11) |
| Opening of trade (F19) | Wage distribution (J31) |
| Opening of trade (F19) | Wage inequality (J31) |
| Wage distribution (J31) | Sorting and matching processes (C78) |
| Opening of trade (F19) | Industry productivity (O49) |
| Sorting and matching of heterogeneous workers (J29) | Industry productivity (O49) |
| Labor market frictions (J29) | Structural unemployment (J64) |
| Labor market frictions (J29) | Efficiency of resource allocation (D61) |