Specialization and the division of labor are the sources of high productivity in modern society. When worker skills are multi-dimensional, workers may face a choice between general versus specific human capital investment. Given that individual agents face uncertainty in the relative output...

This paper analyzes the effects of trade liberalisation on the political support for policies that redistribute income between workers in different sectors. We allow for worker heterogeneity and imperfect mobility of workers across sectors, giving rise to a trade-off between redistribution and...

In an estimated two-sector New-Keynesian model with durable and nondurable goods, an inverse relationship between sectoral labor mobility and the optimal weight the central bank should attach to durables inflation arises. The combination of nominal wage stickiness and limited labor mobility...

We consider a two-sector economy with a low-technology agriculture sector (sector A) and a high-technology manufacture sector (sector M). We investigate the scenario with mobility constraint that worker in sector A, when unemployed, has to afford the migration cost in order to move to sector M....

How should central banks optimally aggregate sectoral inflation rates in the presence of imperfect labor mobility across sectors? We study this issue in a two-sector New-Keynesian model and show that a lower degree of sectoral labor mobility, ceteris paribus, increases the optimal weight on...

This paper addresses the role of mobility costs in shaping the effects of trade integration on wage inequality and welfare. We present a three-factor, two-sector model in which the production technology exhibits capital-skill complementarity and the cost of moving across sectors differs between...