Dokument

Summary:
This paper analyzes how trade liberalization influences the unemploy- ment rate of workers with di¤erent abilities. We refine the Melitz (2003) framework to account for trade unions and heterogeneous workers, who di¤er with respect to their abilities. Our main findings are: (i) high- ability workers profit from trade liberalization in terms of higher wages and higher employment; (ii) the least efficient workers loose their job and switch to long-term unemployment (worker-selection effect); (iii) if a country is endowed with a large fraction of low-skilled workers, trade lib- eralization leads to a rise in aggregate unemployment. In this case, trade liberalization may harm a country's welfare.

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