Comparative Advantage and Skill-Specific Unemployment∗

Preliminary draft- comments highly welcome! We introduce unemployment and endogenous selection of workers into different skill classes in a trade model with two sectors and heterogenous firms in order to study the distributional consequences and the skill-specific unemployment effects of trade liberalization. We show that the gains from trade will be distributed very unequally: Unskilled (skilled) workers loose in terms of real wages and employment levels in the skill-intensive (unskill-intensive) sector. However, the inequality of workers between sectors is much larger for skilled labor than for unskilled labor. On average, unem-ployment among unskilled workers increases when a skill abundant coun-tries opens up to trade