Firm Heterogeneity and the Labor Market Effects of Trade Liberalization*

Abstract

This article develops a model that incorporates workers' fair wage preferences into a general equilibrium framework with heterogeneous firms. In a setting where the wage considered to be fair by workers depends on the productivity of the firm they are working in, we study the determinants of profits, involuntary unemployment and within-group wage inequality. We use this model to investigate the effects of globalization, thereby pointing to distributional conflicts that have so far not been accounted for: a simultaneous increase of average profits and involuntary unemployment as well as a surge in within-group wage inequality. Copyright � (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

The economic effects of constitutions: replicating—and extending—Persson and Tabellini

“…They further argue that the majority (of both voters and legislators) in parliamentary systems can pass spending programs whose benefits are clearly targeted at themselves, implying that they are able to make themselves better off to the detriment of the minority. This is why Persson, Roland and Tabellini (2000) predict that both taxes and government expenditures will be higher in parliamentary than in presidential systems.…”

“…In most parliamentary systems, the chief executive does, however, depend on being able to secure a parliamentary majority. In a number of previous papers, Persson, Roland, and Tabellini (1997,2000) had argued that it was easier for legislatures to collude with the executive in parliamentary systems which is why they expect both higher tax rates as well as higher corruption levels than in presidential systems. They further argue that the majority (of both voters and legislators) in parliamentary systems can pass spending programs whose benefits are clearly targeted at themselves, implying that they are able to make themselves better off to the detriment of the minority.…”

Judiciaries in corrupt societies

“…18 Full commitment is a strong assumption since the CA has incentives to take as much as possible from the judiciary ex post. Olson (2000) finds that commitment is difficult since dictators often have a short time horizon. Moreover, Bardhan (1997 p. 1325) writes: "This ability to credibly commit is a feature of "strong" states that very few developing countries have."…”

“…While they focus on explaining why independent and dependent judiciaries have come about (in 12th century England and France) we study their affect on the distributions of rents. Huther and Shah (2000) and Stephenson (2001) finally argue that uncorrupted independent judiciaries reduce corruption. We show in a micro-founded model that this may be true even if they are corrupt.…”

“…We therefore control for political rights (POL) as well. 34 The source for this variable is Freedom House (2000)(2001). In Appendix Table B1, average values of the variables included in the regressions are shown.…”