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Competition, Trade and Wages

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  • Neary, J Peter

Abstract

I review briefly the empirical evidence in the trade and wages debate, which overwhelmingly rejects the Heckscher-Ohlin explanation for recent increases in OECD skill premia. I then argue that the same evidence is also difficult to reconcile in general equilibrium with the view that exogenous skill-biased technological progress is the sole culprit. Finally, I present a model of oligopolistic competition, which is more consistent with the evidence. Removing quantitative import constraints (a metaphor for increased foreign competition) encourages both home and foreign firms to invest more aggressively, raising their demand for skilled labour even at unchanged relative wages.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2732.

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Date of creation: Mar 2001
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Handle: RePEc:cpr:ceprdp:2732

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Keywords: OECD Wage Inequality; Oligopolistic Competition; Skill Premia; Skill-Biased Technological Progress; Trade And Wages;

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References

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  1. Johnson, George & Stafford, Frank, 1999. "The labor market implications of international trade," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 34, pages 2215-2288 Elsevier.
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Citations

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Cited by:
  1. Weiss, Pia & Wälde, Klaus, 2001. "Globalisation is good for you: Distributional effects of mergers caused by globalisation," Dresden Discussion Paper Series in Economics 07/01, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  2. Anthony C. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Working Paper Series 881, CESifo Group Munich.
  3. Ekholm, Karolina & Midelfart, Karen Helene, 2005. "Relative wages and trade-induced changes in technology," European Economic Review, Elsevier, vol. 49(6), pages 1637-1663, August.
  4. Fontagne, Lionel & Daniel Mirza, 2002. "International Trade and Rent Sharing in Developed and Developing countries," Royal Economic Society Annual Conference 2002 77, Royal Economic Society.
  5. Wilfred J. Ethier, 2002. "Globalization, Globalisation," Tinbergen Institute Discussion Papers 02-088/2, Tinbergen Institute.
  6. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
  7. Donald Robbins, 2003. "The impact of trade liberalization upon inequality in developing countries - A review of theory and evidence-," DOCUMENTOS DE ECONOMÍA 003601, UNIVERSIDAD JAVERIANA - BOGOTÁ.
  8. J. Peter Neary, 2000. "Monopolistic Competition and International Trade Theory," Working Papers 200025, School Of Economics, University College Dublin.
  9. Denny, Kevin & Harmon, Colm & Lydon, Raemonn, 2002. "Cross Country Evidence on the Returns to Education: Patterns and Explanations," CEPR Discussion Papers 3199, C.E.P.R. Discussion Papers.
  10. Ugo Fratesi, 2004. "Regional policy from a supra-regional perspective," ERSA conference papers ersa04p509, European Regional Science Association.
  11. Ethier, Wilfred J., 2005. "Globalization, globalisation: Trade, technology, and wages," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 237-258.

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