This paper reviews a new framework for analyzing the interrelationship between inequality, unemployment, labor market frictions, and foreign trade. This framework emphasizes firm heterogeneity and search and matching frictions in labor markets. It implies that the opening of trade may raise...

How much does a nation spend on resources to 'grease the wheels of trade'? To examine this question the Dutch economy is used as an exemplary case as the Netherlands are known as a nation of traders. This image was derived in the seventeenth century from successes in long distance trade,...

Transaction costs are a major reason why international trade flows are much smaller than traditional trade theory would suggest. Trust between trading partners lowers transaction costs and may therefore enhance trade. The empirical analysis of this paper shows that more trust leads to more trade...

This discussion paper resulted in a publication in <A href="http://link.springer.com/article/10.1007%2Fs10645-005-2933-4">'De Economist'</A>, 2005, 153(2), 139-165.<P> How much does a nation spend on resources to 'grease the wheels of trade'? To examine this question the Dutch economy is used as an exemplary case as the Netherlands are known as a nation of traders. This...</p></a>

Transaction costs are a major reason why international trade flows are much smaller than traditional trade theory would suggest. Trust between trading partners lowers transaction costs and may therefore enhance trade. The empirical analysis of this paper shows that more trust leads to more trade...

Over time, trade has undergone profound changes gaining new features and valent forms as a result of trade and technology development. Electronic commerce is the use of value-added in a network applications such as electronic transfer of documents (EDI), the fax communication, bar codes, file...

This paper embeds a principal-agent firm in an otherwise standard trade model a la Melitz (2003) to investigate the impact of globalization on the provision of managerial incentives and on the distribution of managerial compensation. Facing contractual frictions due to limited liability, firms...

This paper analyzes the impact of trade integration on wage inequality when there is heterogeneity across both workers and firms. By incorporating labor assignment into the heterogeneous firms literature I develop a model in which positive assortative matching between worker skill and firm...

A recent boom in commodities-for-manufactures trade between China and other developing countries has led to much concern about the losers from rising import competition in manufacturing, but little attention on the winners from growing Chinese demand for commodities. Using census data for...

This paper studies how firm heterogeneity in terms of productivity affects the balance between agglomeration and dispersion forces in the presence of pecuniary externalities through a selection model of monopolistic competition with variable mark-ups. It shows that firm heterogeneity matters....