Trade and the Labor Market: Recent Developments and New Frontiers

Carl Davidson and Nicholas Sly

in The Oxford Handbook of International Commercial Policy

Published in print May 2012 | ISBN: 9780195378047
Published online September 2012 | | DOI:

Series: Oxford Handbooks

Trade and the Labor Market: Recent Developments and New Frontiers

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A new literature has started to emerge that underscores the role that worker heterogeneity plays for a variety of trade issues. New models that allow for nontrivial distributions of talent (or skills) across the workforce have been developed, and they have raised a whole host of new and interesting questions. This article surveys this emerging literature, highlights a few of the more intriguing issues that have been addressed, and suggests some avenues that we believe are ripe for further investigation. It begins in Section 2 by considering a set of articles similar to traditional trade theory, in that product markets are assumed to be perfectly competitive, all firms within an industry are assumed to be identical, and industries differ in the manner in which workers' skills are used in the production process. The key questions that must be addressed are how the market sorts heterogeneous workers across the sectors of the economy and how trade alters that sorting. Section 3 turns to models that allow for heterogeneous firms within an industry. The sorting problem then changes, with workers and firms within the same industry seeking appropriate matches. Section 4 focuses on models that explicitly highlight the role of team production in the presence of a heterogeneous workforce. The central issues that must then be addressed are how teams are formed and how globalization and the labor market integration that comes with it affect the composition of teams.

Keywords: worker heterogeneity; labor force; team production; heterogeneous workforce

Article.  10605 words. 

Subjects: Economics ; International Economics ; Labour and Demographic Economics

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