NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Trade and Inequality: From Theory to Estimation

Elhanan Helpman, Oleg Itskhoki, Marc-Andreas Muendler, Stephen J. Redding

NBER Working Paper No. 17991
Issued in April 2012
NBER Program(s):   ITI

While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and sectors, more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and sectors. Using linked employer-employee data for Brazil, we show that much of overall wage inequality arises within sector-occupations and for workers with similar observable characteristics; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to firm employment size and trade participation. We then extend the heterogenous-firm model of trade and inequality from Helpman, Itskhoki, and Redding (2010) and estimate it with Brazilian data. We show that the estimated model provides a close approximation to the observed distribution of wages and employment. We use the estimated model to undertake counterfactuals, in which we find sizable effects of trade on wage inequality.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

This paper was revised on September 26, 2013

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Users who downloaded this paper also downloaded these:
Goldberg and Pavcnik w10593 Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries
Helpman, Itskhoki, and Redding w16662 Trade and Labor Market Outcomes
Costinot, Vogel, and Wang w17976 Global Supply Chains and Wage Inequality
Helpman, Itskhoki, and Redding w14478 Inequality and Unemployment in a Global Economy
Fajgelbaum, Grossman, and Helpman w17550 A Linder Hypothesis for Foreign Direct Investment
 
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