Heterogeneous Workers and International Trade
In this paper, I survey the recent theoretical literature that incorporates heterogeneous labor into models of international trade. The models with heterogeneous labor have been used to study how talent dispersion can be a source of comparative advantage, how the opening of trade affects the full distribution of wages, and how trade affects industry productivity and efficiency via its impact on sorting and matching in the labor market. Some of the most recent contributions also introduce labor market frictions to study the effects of trade on structural unemployment and on mismatch between workers and firms.
Based on the Bernhard Harms Prize Lecture delivered at the Kiel Institute of World Economics on October 31, 2012. Part of the work on this lecture was completed when I was visiting STICERD at the London School of Economics and Centre de Recerca en Economia Internacional (CREI) in Barcelona. I thank both institutions for their hospitality and support. I am grateful to Arnaud Costinot, Elhanan Helpman, Stephen Redding, and Esteban Rossi-Hansberg for their comments and suggestions. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.