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Trade, Wages, and Specific Factors

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Author Info
Indro Dasgupta
Thomas Osang

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Abstract

In this paper, we use a multisector specific-factors model with sector-specific capital and two mobile factors, skilled and unskilled labor, to examine the effects of trade, technology, and factor endowments on the skill premium in US manufacturing industries. Based on this model and data for the US manufacturing sector from 1958-96, we calculate changes in the skill premium and then carry out a decomposition to identify the changes caused by product price changes (trade), technological progress, labor, and capital endowment changes. The decomposition reveals that trade effects, working through product price changes, caused the skill premium to increase moderately. Changes in capital endowments (new investments) had a positive effect on the skill premium, with the strongest impact during the 1980s, while the effect of technological change on the skill premium varied over time. Finally, changes in relative labor endowments had a negative effect on the skill premium. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 15 (2007)
Issue (Month): 1 (02)
Pages: 45-61
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Handle: RePEc:bla:reviec:v:15:y:2007:i:1:p:45-61

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  1. Wang-Sheng Lee, 2007. "Immigration and Wages: An Open Economy Model," Melbourne Institute Working Paper Series wp2007n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
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This page was last updated on 2009-12-19.

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