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Shifts In Relative U.S. Wages: The Role Of Trade, Technology, And Factor Endowments

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Author Info
Robert E. Baldwin
Glen G. Cain
Abstract

A basic relationship of the standard general equilibrium trade model relating product-price changes to factor-price changes is used - together with other economic relationships based on this model - to investigate empirically the importance of changes in trade, technology, and factor endowments in accounting for the shifts in relative wages of less-educated workers compared to more-educated workers from 1967 to 1996. In the early part of the period when wage inequality decreased, the dominant explanatory factor seems to have been a relative increase in the supply of highly educated labor. However, since the late 1970s, none of the three economic forces considered can alone account for the observed changes in relative wages, prices, outputs, net exports, and factor-use ratios. In particular, both education-biased technical progress that was greater in industries that intensively used more-educated labor and increased import competition in industries that intensively used less-educated labor seem to have played important roles in bringing about the increase in wage inequality during the 1980s and 1990s. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 82 (2000)
Issue (Month): 4 (November)
Pages: 580-595
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Handle: RePEc:tpr:restat:v:82:y:2000:i:4:p:580-595

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  1. Matthias Weiss & Alfred Garloff, 2005. "Skill Biased Technological Change and Endogenous Benefits: The Dynamics of Unemployment and Wage Inequality," MEA discussion paper series 05100, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
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  2. Giuseppe Celi, 2004. "Quality Differentiation, Vertical Disintegration and The Labour Market Effects of Intra-Industry Trade," CELPE Discussion Papers 86, CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy. [Downloadable!]
  3. Hijzen, Alexander & Görg, Holger & Hine, Robert C., 2003. "International Fragmentation and Relative Wages in the UK," IZA Discussion Papers 717, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Dutt, Pushan & Traca, Daniel A., 2005. "Trade and the Skill-Bias - It's Not How Much, But With Whom You Trade," CEPR Discussion Papers 5263, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Joseph Francois & Kevin Grier & Douglas Nelson, 2004. "Globalization, Roundaboutness, and Relative Wages," Tinbergen Institute Discussion Papers 04-021/2, Tinbergen Institute. [Downloadable!]
    Other versions:
  6. Thierfelder, Karen & Robinson, Sherman, 2002. "Trade and tradability," TMD discussion papers 93, International Food Policy Research Institute (IFPRI). [Downloadable!]
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