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Trade Development and Political Economy presents Stephen Redding

341 Eggers Hall

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Trade and Inequality: From Theory to Estimation While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and industries, more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and industries. Using linked employer-employee data for Brazil, the authors show that much of overall wage inequality arises within sector-occupations; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to employment size and trade participation. The authors then extend the theoretical model of trade and inequality from Helpman, Itskhoki, and Redding (2010) and structurally estimate it with Brazilian data. They show that the estimated model fits the data well, both in terms of some key moments as well as in terms of the overall distributions of wages and employment. International trade is important for this fit. In particular, the authors show that by shutting down the trade channel the estimated model is significantly less successful in matching the data. Speaker: Steve Redding is Professor of Economics at Princeton University. He is also one of the co-editors of the Journal of International Economics, the top journal in the fields of international trade and international macroeconomics. Steve Redding has worked in almost every area of international trade including trade and labor, economic geography, trade and productivity and several aspects of trade and development. His research has been published in top economics journals like the American Economic Review, Econometrica,.the Quarterly Journal of Economics, the Review of Economic Studies etc. Authors: Elhanan Helpman, Oleg Itskhoki, Marc Muendler and Stephen Redding Speaking: Stephen Redding Professor of Economics Princeton University Sponsor: Moynihan Institute of Global Affairs, Co-Sponsor Trade, Development, and Political Economy, Co-Sponsor

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