Welfare in Models of Trade with Heterogeneous Firms

I illustrate that the welfare improvement property of the Melitz model is due to the shape of the aggregate labor demand curve, which slopes upwards. By slightly changing some assumptions in the model, this curve may have a negative slope. In this case, increases in aggregate productivity result in a reduction in welfare. For example, this may occur when fixed costs are measured in units of aggregate output instead of labor.

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Year of publication:	2008-10
Authors:	Janiak, Alexandre
Institutions:	Institute for the Study of Labor (IZA)
Subject:	heterogenous firms \| international trade \| aggregate labor demand curve \| welfare

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Extent:	application/pdf
Series:	IZA Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 3803 12 pages
Classification:	F12 - Models of Trade with Imperfect Competition and Scale Economies ; F16 - Trade and Labor Market Interactions ; J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005233865