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Foreign Competition and Wage Inequality

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Neary, J Peter

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

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Greenaway, David & Hine, Robert C. & Wright, Peter, 1999. "An empirical assessment of the impact of trade on employment in the United Kingdom," European Journal of Political Economy, Elsevier, vol. 15(3), pages 485-500, September. [Downloadable!] (restricted)
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  12. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June. [Downloadable!] (restricted)
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  14. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 101(4), pages 533-54, December. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ioannis Cholezas & Panos Tsakloglou, 2007. "Earnings Inequality in Europe: Structure and Patterns of Inter-Temporal Changes," IZA Discussion Papers 2636, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Paolo Epifani & Gino Gancia, 2004. "The Skill Bias of World Trade," Economics Working Papers 833, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2007. [Downloadable!]
    Other versions:
  3. Paolo Figini & Holger Görg, 2006. "Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation," IZA Discussion Papers 2336, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Chi-Chur Chao & Bharat Hazari & Eden Yu, 2006. "Rising wage inequality in developing economies: Privatization and competition," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 15(3), pages 375-385, September. [Downloadable!] (restricted)
  5. Norbäck, Pehr-Johan & Persson, Lars, 2003. "Privatization and Restructuring in Concentrated Markets," Working Paper Series 605, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  6. Neary, J Peter, 2002. "Foreign Direct Investment and the Single Market," CEPR Discussion Papers 3419, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. J.Peter Neary, 2003. "Globalisation and Market Structure," DNB Staff Reports (discontinued) 100, Netherlands Central Bank. [Downloadable!]
  8. Norbäck, Pehr-Johan & Persson, Lars, 2007. "Globalization and Profitability of Cross-border Mergers & Acquisitions," CEPR Discussion Papers 6102, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Bertrand Crettez & Marie-Cécile Fagart, 2008. "Does entry improve welfare? A general equilibrium approach to competition policy," EconomiX Working Papers 2008-14, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  10. Lommerud, Kjell Erik & Sørgard, Lars & Straume, Odd Rune, 2003. "National versus International Mergers in Unionised Oligopoly," CEPR Discussion Papers 4040, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  11. Sebastian Braun, 2006. "Trade Liberalisation, Process and Product Innovation, and Relative Skill Demand," JEPS Working Papers 06-004, JEPS. [Downloadable!]
    Other versions:
  12. Dermot Leahy & J. Peter Neary, 2007. "Multilateral Subsidy Games," Economics Series Working Papers 346, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  13. Klaus Wälde & Pia Weiss, 2004. "International Competition, Slim Firms and Wage Inequality," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  14. Pehr-Johan Norbäck & Lars Persson, 2008. "Globalization and profitability of cross-border mergers and acquisitions," Economic Theory, Springer, vol. 35(2), pages 241-266, May. [Downloadable!] (restricted)
  15. Norbäck, Pehr-Johan & Persson, Lars, 2006. "The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists and Oligopolists," CEPR Discussion Papers 5449, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  16. Norbäck, Pehr-Johan & Persson, Lars & Vlachos, Jonas, 2006. "Cross-Border Acquisitions and Corporate Taxes: Efficiency and Tax Revenues," Working Paper Series 663, Research Institute of Industrial Economics. [Downloadable!]
  17. Paolo Epifani & Gino Gancia, 2004. "Increasing Returns, Imperfect Competition and Factor Prices," Economics Working Papers 953, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2005. [Downloadable!]
    Other versions:
  18. Norbäck, Pehr-Johan & Persson, Lars, 2005. "Investment Liberalization - Why a Restrictive Cross-Border Merger Policy can be Counterproductive," Working Paper Series 644, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  19. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2005. "Globalization and Union Opposition to Technological Change," CEPR Discussion Papers 4836, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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