TY  - JOUR
AU  - Helpman,Elhanan
AU  - Itskhoki,Oleg
AU  - Redding,Stephen
TI  - Wages, Unemployment and Inequality with Heterogeneous Firms and Workers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14122
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14122
L1  - http://www.nber.org/papers/w14122.pdf
N1  - Author contact info:
Elhanan Helpman
Department of Economics
Harvard University
1875 Cambridge Street
Cambridge, MA 02138
Tel: 617-495-4690
Fax: 617-495-7730
E-Mail: ehelpman@harvard.edu

Oleg Itskhoki
Department of Economics
Princeton University
Fisher Hall 306
Princeton, NJ 08544-1021
Tel: 609/258-5493
Fax: 609/258-6419
E-Mail: itskhoki@princeton.edu

Stephen J. Redding
Department of Economics
and Woodrow Wilson School
Princeton University
Fisher Hall
Princeton, NJ 08544
Tel: 609/258-4016
Fax: 609/258-6419
E-Mail: reddings@princeton.edu
AB  - 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.
ER  -