Trade and Labor Market Integration with Heterogeneous Labor

This paper explores the impact of labor market integration between an advanced country (North) and backward country (South) on income distribution and pattern oftrade by making use of a two-sector, competitive trade model with heterogeneous labor. We prove that, for the North, after the labor market integration, none of the workers is worse off; instead some people earn higher wages than before. And, for the South, some workers are worse off. In addition, we find that the pattern of trade for the integrated economy might reverse.