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Foreign Competition and Wage Inequality

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  • Neary, J Peter

Abstract

I argue that increased foreign competition can affect technical choice and skill differentials even when actual imports do not rise significantly. I present a model of General Oligopolistic Equilibrium (‘GOLE’) in which a reduction in import barriers (whether technological or policy-imposed) encourages more strategic investment by incumbent firms. The predictions accord with many of the stylised facts: higher skill premia; higher ratios of skilled to unskilled workers employed in all sectors and throughout the economy; little change in import volumes or prices; and rapid technological progress with rather little change in total factor productivity.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3420.

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Date of creation: Jun 2002
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Handle: RePEc:cpr:ceprdp:3420

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Keywords: general oligopolistic equilibrium (GOLE); skill premia; skill-based technical progress; strategic investment; trade and wages;

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References

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