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The Choice of Structural Model in Trade-Wages Decompositions

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  • Abrego, Lisandro
  • Whalley, John

Abstract

This paper uses a calibrated general equilibrium model to decompose observed wage changes from trade and technology shocks into portions attributable to each source. It highlights some difficulties with the numerical performance of widely used theoretical trade structures. For small economies, the Heckscher-Ohlin model reveals specialization problems unless the price changes accompanying trade shocks are small. It can also yield strikingly different decompositions of the same wage change. A differentiated-goods model removes specialization problems and accommodates large price changes, but introduces demand-side responses greatly reducing the effect of trade on wages, and performs implausibly with sector-biased technical change. Copyright 2000 by Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 8 (2000)
Issue (Month): 3 (August)
Pages: 462-77

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Handle: RePEc:bla:reviec:v:8:y:2000:i:3:p:462-77

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Citations

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Cited by:
  1. Sang-Wook (Stanley) Cho & Juliàn P. Dìaz, 2014. "Accounting for Skill Premium Patterns during the EU Accession: Productivity or Trade?," Discussion Papers, School of Economics, The University of New South Wales 2014-14, School of Economics, The University of New South Wales.
  2. Stephen Tokarick, 2002. "Quantifying the Impact of Tradeon Wages," IMF Working Papers 02/191, International Monetary Fund.
  3. Niven Winchester, 2006. "Trade and Rising Wage Inequality: What can we learn from a Decade of Computable General Equilibrium Analysis?," Working Papers, University of Otago, Department of Economics 0606, University of Otago, Department of Economics, revised Oct 2006.
  4. Winchester, Niven & Greenaway, David, 2007. "Rising wage inequality and capital-skill complementarity," Journal of Policy Modeling, Elsevier, Elsevier, vol. 29(1), pages 41-54.
  5. Hui Huang & John Whalley, 2004. "The Use of Literature Based Elasticity Estimates in Calibrated Models of Trade-Wage Decompositions: A Calibmetric Approach," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c009_007, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. Dirk Velde, 2001. "Foreign direct investment and factor prices in U.S. manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 137(4), pages 622-643, December.
  7. Lisandro Abrego & John Whalley, 2002. "Decomposing Wage Inequality Change Using General Equilibrium Models," NBER Working Papers 9184, National Bureau of Economic Research, Inc.
  8. Edwards, T Huw & John Whalley, 2003. "Short and Long Run Decomposition of OECD Wage Inequality Changes," Royal Economic Society Annual Conference 2003, Royal Economic Society 72, Royal Economic Society.
  9. Michael Pflüger, 2003. "Trade, Technology and Labour Markets: Empirical Controversies in the Light of the Jones Model," Discussion Papers of DIW Berlin 328, DIW Berlin, German Institute for Economic Research.
  10. Lisandro Abrego & John Whalley, 2000. "Demand Side Considerations and the Trade and Wages Debate," NBER Working Papers 7674, National Bureau of Economic Research, Inc.
  11. Niven Winchester & David Greenaway & Geoffrey V. Reed, 2006. "Skill Classification and the Effects of Trade on Wage Inequality," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 142(2), pages 287-306, July.
  12. Emini, Christian Arnault & Kanmi Feunou, Dorine, 2008. "Decomposing the Effects of Economic Policies on Poverty Trends in Cameroon: A Double Calibration Micro Simulated General Equilibrium Analysis," MPRA Paper 14820, University Library of Munich, Germany.
  13. Thierfelder, Karen & Robinson, Sherman, 2002. "Trade and the skilled-unskilled wage gap in a model with differentiated goods," TMD discussion papers, International Food Policy Research Institute (IFPRI) 96, International Food Policy Research Institute (IFPRI).
  14. Michael Pflüger, 2001. "Trade, capital mobility, and the German labour market," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 137(3), pages 473-500, September.
  15. Christian Arnault Émini & Dorine Kanmi Feunou, 2008. "Décomposition des effets des politiques économiques sur l'évolution de la pauvreté au Cameroun: une analyse en équilibre général micro-simulé avec double calibration," Working Papers MPIA, PEP-MPIA 2008-18, PEP-MPIA.
  16. Scott, Ewan & Emerson, Robert D., 2001. "Wage Differentials And Trade Relationships In Jamaica: Applications Of Truncated Regression Models And Repeated Cross-Section Data," 2001 Annual meeting, August 5-8, Chicago, IL, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 20475, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  17. Thierfelder, Karen & Robinson, Sherman, 2002. "Trade and tradability," TMD discussion papers, International Food Policy Research Institute (IFPRI) 93, International Food Policy Research Institute (IFPRI).

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