Good jobs, bad jobs, and trade liberalization
By: Donald R. Davis, James Harrigan.
Contributors: Harrigan, James.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13139.; Working paper series (National Bureau of Economic Research) -- working paper no. 13139.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 43
Subjects: Free trade; Globalization; Wages -- Econometric models; Income distribution -- Econometric models
Description: Globalization threatens "good jobs at good wages", according to overwhelming public sentiment. Yet professional discussion often rules out such concerns a priori. We instead offer a framework to interpret and address these concerns. We develop a model in which monopolistically competitive firms pay efficiency wages, and these firms differ in both their technical capability and their monitoring ability. Heterogeneity in the ability of firms to monitor effort leads to different wages for identical workers - good jobs and bad jobs - as well as equilibrium unemployment. Wage heterogeneity combines with differences in technical capability to generate an equilibrium size distribution of firms. As in Melitz (2003), trade liberalization increases aggregate efficiency through a firm selection effect. This efficiency-enhancing selection effect, however, puts pressure on many "good jobs", in the sense that the high-wage jobs at any level of technical capability are the least likely to survive trade liberalization. In a central case, trade raises the average real wage but leads to a loss of many "good jobs" and to a steady-state increase in unemployment.
Notes: "May 2007"

Includes bibliographical references (p. 34-35).

Also available in PDF from the NBER world wide web site (www.nber.org).