International Trade and Labor Market Discrimination

Richard Chisik and Julian Emami Namini
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Julian Emami Namini: Erasmus University Rotterdam, the Netherlands

No 16-058/VI, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We embed a competitive search model with labor market discrimination, or nepotism, into a two-sector, two-country framework in order to analyze how labor market discrimination impacts the pattern of international trade and also how trade trade affects discrimination. Discrimination, or nepotism, reduces the matching probability and output in the skilled-labor intensive differentiated-product sector so that the country with more discriminatory firms has a comparative advantage in the simple sector. As countries alter their production mix in accordance with their comparative advantage, trade liberalization can then reinforce the negative effect of discrimination on development in the more discriminatory country and reduce its effect in the country with fewer discriminatory firms. Similarly, the profit difference between non-discriminatory and discriminatory firms increases in the less discriminatory country and shrinks in the more discriminatory one. In this way trade can further reduce discrimination in a country where it is less prevalent and increase it where it is more firmly entrenched.

Keywords: Discrimination; Nepotism; International Trade; Competitive Search (search for similar items in EconPapers)
JEL-codes: F16 F66 J71 (search for similar items in EconPapers)
Date: 2016-07-28, Revised 2016-12-20
New Economics Papers: this item is included in nep-int and nep-lma
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Related works:
Journal Article: INTERNATIONAL TRADE AND LABOR‐MARKET DISCRIMINATION (2019)
Working Paper: International Trade and Labor Market Discrimination (2017)
Working Paper: International Trade and Labor Market Discrimination (2016)
Working Paper: International Trade and Labor Market Discrimination (2015)
Working Paper: International Trade and Labor Market Discrimination (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20160058

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