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Entrepreneurs, jobs, and trade

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  • Dinopoulos, Elias
  • Unel, Bulent
Abstract
We propose a simple theory of endogenous firm productivity, unemployment, and top income inequality. High-talented individuals choose to become self-employed entrepreneurs and acquire more managerial (human) capital; whereas low-talented individuals become workers and face the prospect of equilibrium unemployment. In a two-country global economy, trade openness raises firm productivity, increases top income inequality, and may reduce welfare in the country exporting the good with lower relative labor-market frictions. Trade openness reduces firm productivity, lowers top income inequality, and necessarily raises welfare in the other country. The effect of trade on unemployment is ambiguous. Unilateral job-creating policies increase welfare in both countries. However, they reduce unemployment and raise top income inequality in the policy-active country; and reduce top income inequality while increasing unemployment in the policy-passive country.

Suggested Citation

  • Dinopoulos, Elias & Unel, Bulent, 2015. "Entrepreneurs, jobs, and trade," European Economic Review, Elsevier, vol. 79(C), pages 93-112.
    • Handle: RePEc:eee:eecrev:v:79:y:2015:i:c:p:93-112
    DOI: 10.1016/j.euroecorev.2015.07.010
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    Cited by:

    1. Mingzhi Xu, 2020. "Globalization, the skill premium, and income distribution: the role of selection into entrepreneurship," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 633-668, August.
    2. Unel, Bulent, 2018. "Offshoring and unemployment in a credit-constrained economy," Journal of International Economics, Elsevier, vol. 111(C), pages 21-33.
    3. Elias Dinopoulos & Bulent Unel, 2017. "Managerial capital, occupational choice and inequality in a global economy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(2), pages 365-397, May.
    4. Bach Nguyen & Nguyen Phuc Canh & Su Dinh Thanh, 2021. "Institutions, Human Capital and Entrepreneurship Density," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(3), pages 1270-1293, September.
    5. Nguyen, Canh Phuc & Nguyen, Bach & Duy Tung, Bui & Dinh Su, Thanh, 2021. "Economic complexity and entrepreneurship density: A non-linear effect study," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    6. Unel, Bulent & Upton, Gregory B., 2023. "Oil & gas induced economic fluctuations and self-employment," Labour Economics, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    Inequality; Managerial capital; Search and matching; Trade; Unemployment;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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