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A simple model of firm heterogeneity, international trade, and wages

Authors
Journal
Journal of International Economics
0022-1996
Publisher
Elsevier
Publication Date
Volume
65
Issue
1
Identifiers
DOI: 10.1016/j.jinteco.2004.01.001
Keywords
  • Intra-Industry Trade
  • Technology Adoption
  • Firm Heterogeneity
  • Trade And Wages

Abstract

Abstract This paper presents a general equilibrium trade model in which homogeneous firms choose a technology from a set of competing technologies and choose employees from a set of workers of heterogeneous skill. In equilibrium, the interaction between the characteristics of competing technologies, international trade costs, and the availability of workers of heterogeneous skill gives rise to firm heterogeneity. The model generates several of the stylized facts concerning the (apparent) superiority of firms that engage in international trade relative to those that do not and has implications for the effect of international trade on the skill premium and on observed industry-level productivity.

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