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Does trade in differentiated goods raise wages?

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  • Tomat, Gian Maria

Abstract

We present a modified Heckscher–Ohlin model featuring product differentiation and monopolistic competition. Consumer preferences take the constant elasticity of substitution form. Production technology has constant returns to scale. The analysis shows, that in the movement from autarky to free trade the change in the wage/rental ratio following from an increase in the number of differentiated product varieties is due to the pattern of relative substitutability between the differentiated and the homogeneous good.

Suggested Citation

  • Tomat, Gian Maria, 2020. "Does trade in differentiated goods raise wages?," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 344-352.
    • Handle: RePEc:eee:streco:v:53:y:2020:i:c:p:344-352
    DOI: 10.1016/j.strueco.2019.05.008
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    References listed on IDEAS

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    More about this item

    Keywords

    International trade; Product differentiation; Monopolistic competition; Factor price equalization;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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