Abstract
We develop a neoclassical trade model with heterogeneous factors of production. We consider a world with two factors, labor and managers, each with a distribution of ability levels. Production combines a manager of some type with a group of workers. The output of a unit depends on the types of the two factors, with complementarity between them, while exhibiting diminishing returns to the number of workers.
We examine the sorting of factors to sectors and the matching of factors within sectors, and we use the model to study the determinants of the trade pattern and the effects of trade on the wage and salary distributions. Finally, we extend the model to include search frictions and consider the distribution of employment rates.
We examine the sorting of factors to sectors and the matching of factors within sectors, and we use the model to study the determinants of the trade pattern and the effects of trade on the wage and salary distributions. Finally, we extend the model to include search frictions and consider the distribution of employment rates.
| Original language | English |
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| Publisher | Edinburgh School of Economics Discussion Paper Series |
| Number of pages | 26 |
| Publication status | Published - Sept 2013 |
Publication series
| Name | ESE Discussion Papers |
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| No. | 227 |
Keywords / Materials (for Non-textual outputs)
- heterogeneous labor
- matching
- sorting
- productivity
- wage distribution
- international trade
- F11
- F16