WENLI CHENG () (Department of Economics, Monash University, Caulfield East, VIC 3145, Australia) DINGSHENG ZHANG (China Economics and Management Academy, Central University of Finance and Economics, China)
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This paper develops two models to study the impact of trade in intermediate goods on wage inequality between skilled and unskilled labor in a developed country and a developing country. The first model assumes symmetric production technologies in the intermediate good. It predicts that trade in the intermediate good will increase wage inequality in the developed country, but decrease wage inequality in the developing country. The second model assumes asymmetric technologies in the intermediate good. It predicts that trade in the intermediate good can lead to an increase in wage inequality in both the developed country and the developing country.
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