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, Revised in September 2013
NBER Program(s):International Trade and Investment

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.

download in pdf format
   (516 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17991

Published: Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2017. "Trade and Inequality: From Theory to Estimation," The Review of Economic Studies, vol 84(1), pages 357-405.

Users who downloaded this paper also downloaded* these:
Redding w18008 Goods Trade, Factor Mobility and Welfare
Helpman, Itskhoki, and Redding w14122 Wages, Unemployment and Inequality with Heterogeneous Firms and Workers
Artuc and McLaren w18503 Trade Policy and Wage Inequality: A Structural Analysis with Occupational and Sectoral Mobility
Eaton, Kortum, and Sotelo w17864 International Trade: Linking Micro and Macro
Harrison, McLaren, and McMillan w16425 Recent Findings on Trade and Inequality
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us