Trade and market integration with heterogeneous labor

This paper explores the impact of labor market integration between an advanced country (North) and backward country (South) on income distribution and pattern of trade (POT) by making use of a two-sector, competitive trade model with heterogeneous labor. We prove that, for the North, the labor market integration increases income inequality. And, for the South, the integration decreases income inequality. In addition, we find that the POT for the integrated economy might reverse.