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Technological Differences and the Impact of Trade on Wages

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Author Info
Jiro AKITA
Kwan Koo YUN
Abstract

We introduce technological differences in a Heckscher-Ohlin model and study how the technology and endowment differences interact to determine the effects of trade on factor prices. When the endowment effect is dominant in determining the autarky relative factor prices, the relative factor prices of trading countries adjust in converging directions with trade if and only if the capital-rich country has a comparative advantage in the capital-intensive sector. Adjustments in converging directions could be excessive. Relative factor prices tend to converge if the technological comparative advantage is small for given relative endowments or if the relative endowment difference is large for a given technological comparative advantage.

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Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 757.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:feam04:757

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Related research
Keywords: factor-price convergence comparative advantage technological comparative advantage skill premium

Find related papers by JEL classification:
F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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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.:
  1. Gary Burtless, 1995. "International Trade and the Rise in Earnings Inequality," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 800-816, June. [Downloadable!] (restricted)
  2. Freeman, Richard B, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer. [Downloadable!] (restricted)
  3. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1980. "Heckscher- Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 203-24, September. [Downloadable!] (restricted)
  4. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December. [Downloadable!] (restricted)
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  5. Ronald W. Jones, 1997. "Trade, Technology and Income Distribution," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 32(2), pages 129-140, July.
  6. Xu, Yingfeng, 1993. "A General Model of Comparative Advantage with Two Factors and a Continuum of Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 365-80, May. [Downloadable!] (restricted)
  7. Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November. [Downloadable!] (restricted)
  8. Stewart, Douglas B, 1976. "Can Trade Widen the Difference between Factor Rewards? Another Look at the More-Goods-Than-Factors Case," American Economic Review, American Economic Association, vol. 66(4), pages 671-74, September. [Downloadable!] (restricted)
  9. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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