Too Much of a Good Thing? Labor Market Imperfections as a Source of Exceptional Exporter Performance / Carsten Eckel, Stephen R. Yeaple.

Format:

Book

Author/Creator:

Eckel, Carsten.

Contributor:

National Bureau of Economic Research.

Yeaple, Stephen R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23834.

NBER working paper series no. w23834

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

Ex-post firm heterogeneity can result from different strategies to overcome labor market imperfections by ex-ante identical firms--with far-reaching consequences for the welfare effects of trade. With asymmetric information about workers' abilities and costly screening, in equilibrium some firms screen and pay wages based on the true productivity of their workers, and some firms do not screen and pay wages based on the average productivity of their workforce. Screening firms are larger, attract better workers and pay lower effective wages. This results in excessive consumption of resources by large firms relative to the social optimum. Trade liberalization then has an ambiguous effect on aggregate welfare: lower trade costs improve access to foreign goods but also exacerbate the labor market distortion as more resources are transferred to large firms. The model highlights the need to know why firms "excel" before drawing welfare conclusions regarding cross firm reallocations of resources.

Notes:

Print version record

September 2017.