NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Wages, Unemployment and Inequality with Heterogeneous Firms and Workers

Elhanan Helpman, Oleg Itskhoki, Stephen Redding

NBER Working Paper No. 14122
Issued in June 2008
NBER Program(s):   EFG   LS

In this paper we develop a multi-sector general equilibrium model of firm heterogeneity, worker heterogeneity and labor market frictions. We characterize the distributions of employment, unemployment, wages and income within and between sectors as a function of structural parameters. We find that greater firm heterogeneity increases unemployment, wage inequality and income inequality, whereas greater worker heterogeneity has ambiguous effects. We also find that labor market frictions have non-monotonic effects on aggregate unemployment and inequality through within- and between-sector components. Finally, high-ability workers have the lowest unemployment rates but the greatest wage inequality, and income inequality is lowest for intermediate ability. Although these results are interesting in their own right, the main contribution of the paper is in providing a framework for analyzing these types of issues.

download in pdf format
   (600 K)

email paper

This paper is available as PDF (600 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14122

Users who downloaded this paper also downloaded these:
Helpman, Itskhoki, Muendler, and Redding w17991 Trade and Inequality: From Theory to Estimation
Helpman, Itskhoki, and Redding w16662 Trade and Labor Market Outcomes
Helpman and Itskhoki w13365 Labor Market Rigidities, Trade and Unemployment
Helpman, Itskhoki, and Redding w14478 Inequality and Unemployment in a Global Economy
Helpman w15764 Labor Market Frictions as a Source of Comparative Advantage, with Implications for Unemployment and Inequality
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us