Heterogeneous Workers, Trade, and Migration

Inga Heiland and Wilhelm Kohler

No 4387, CESifo Working Paper Series from CESifo

Abstract: We argue that the narrative of variety-induced gains from trade in differentiated goods needs revision. If producing differentiated varieties of a good requires differentiated skills and if the work force is heterogeneous in these skills, then firms are likely to have monopsony power. We show that trade then has adverse labor market effects: It increases the monopsony power of firms and worsens the average quality of matches between firms and workers. We also show that international migration has the opposite beneficial effects. Our model can explain two-way migration among similar countries, a pattern that features prominently in migration data.

Keywords: two-way migration; gains from trade; heterogeneous workers (search for similar items in EconPapers)
JEL-codes: F12 F16 F22 J24 (search for similar items in EconPapers)
Date: 2013
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Related works:
Journal Article: Heterogeneous workers, trade, and migration (2022)
Working Paper: Heterogeneous Workers, Trade, and Migration (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4387

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