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Trade and wage inequality: Local versus Global comparative advantages

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Author Info

  • Alessia Matano
  • Paolo Naticchioni

    () (Dipartimento di Economia, Sapienza University of Rome Italy)

Abstract

This paper shows that disentangling the local and global dimensions of trade can be crucial to get a better understanding of the trade impact on wage inequality. In particular, it allows us to reconcile the empirical evidence with the Heckscher-Ohlin-Samuelson predictions. Our focus here is on Italy, which represents, in our opinion, an appropriate case study. As for local trade -within its own cone of diversification - Italy is specialized in the production of unskill-intensive goods, while for global trade -with respect to the other cone of diversification- it is mainly specialized in the production of skill-intensive goods. On the evidence of these specialization patterns, we point out that the local trade entails a strong impact on wage inequality. In particular, in line with the Heckscher-Ohlin-Samuelson predictions, the local export performance reduces wage inequality since it favours blue-collar workers. As for global trade, it affects and increases wage inequality through the export channel, again consistently with the Heckscher-Ohlin-Samuelson predictions.

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File URL: http://dipartimento.dse.uniroma1.it/DSEISFOL/papers/Matano_Naticchioni_6_2008_WP(2).pdf
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Bibliographic Info

Paper provided by Dipartimento di Economia, Sapienza University of Rome in its series Working Papers - Dipartimento di Economia with number 6-DEISFOL.

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Length: 31 pages
Date of creation: 2008
Date of revision: 2008
Handle: RePEc:des:wpaper:12

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Web page: http://dipartimento.dse.uniroma1.it/economia/
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Related research

Keywords: Trade Specialization; Wage Inequality; Skill Premium;

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Cited by:
  1. Paolo Naticchioni & Andrea Ricci & Emiliano Rustichelli, 2008. "Wage Inequality, Employment Structure and Skill-biased Change in Italy," LABOUR, CEIS, vol. 22(s1), pages 27-51, 06.
  2. Alessia Matano & Paolo Naticchioni, 2009. "Wage distribution and the spatial sorting of workers and firms," Working Papers - Dipartimento di Economia 8-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
  3. Paolo Naticchioni & Andrea Ricci, 2010. "Decreasing Wage Inequality in Italy: The Role of Supply and Demand for Education," Working Papers CELEG 1004, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  4. Rafal Kierzenkowski & Isabell Koske, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 8. The Drivers of Labour Income Inequality – A Literature Review," OECD Economics Department Working Papers 931, OECD Publishing.

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