This paper analyzes trade in an asymmetric 2×2×2 world, where the two countries, labelled America and Europe, differ in their attitudes towards wage inequality. In both America and Europe, fair wage considerations compress differentials between the wages for skilled and unskilled workers,...

This paper derives a new effect of trade liberalisation on the quality of the environment. We show that in the presence of heterogeneous firms the aggregate volume of emissions is influenced not only by the long-established scale effect, but also by a reallocation effect resulting from an...

This paper derives a new effect of trade liberalisation on the quality of the environment. We show that in the presence of heterogeneous firms the aggregate volume of emissions is influenced not only by the long-established scale effect, but also by a reallocation effect resulting from an...

This paper formulates a structural empirical model of heterogeneous firms whose workers exhibit fair-wage preferences, leading to a link between a firm's operating profits and wages of workers employed by this firm. We estimate the parameters of the model in a data-set of five European...

We set up a two-country general equilibrium model, in which heterogeneous firms from one country (the source country) can offshore routine tasks to a low-wage host country. The most productive firms self-select into offshoring, and the impact on welfare in the source country can be positive or...

We develop a model to explain two-way migration of high-skilled individuals between countries that are similar in their economic characteristics. High-skilled migration results from the combination of workers whose abilities are private knowledge, and a production technology that gives...

Is it possible to escape from a poverty trap through international trade? To answer this question, we extend Murphy et al.’s (1989b) famous “Big Push” model towards a global economy. In general oligopolistic equilibrium, firms choice between a traditional CRS and a modern IRS technology...

In this paper, we develop a multi-country open economy extension of the famous Big Push model for a closed economy by Murphy et al. (1989). We show under which conditions the global economy in our model is caught in a poverty trap, characterised by a low-income equilibrium from which an escape...

We show that the standard concertina result for tariff reforms – i.e. lowering the highest tariff increases welfare – no longer holds in general if we allow for international capital mobility. The result can break down if the good whose tariff is lowered is not capital intensive. If the...