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U.S. Wages in General Equilibrium: The Effects of Prices, Technology, and Factor Supplies, 1963-1991

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  • James Harrigan
  • Rita Balaban

Abstract

Wage inequality in the United States has increased, and many suspect that the main causes are changes in technology, international competition, and factor supplies. Our empirical model estimates the general equilibrium relationship between wages and technology, prices, and factor supplies. The model is based on the neoclassical theory of production, and is implemented by assuming that GDP is a function of prices, technology levels, and supplies of capital and different types of labor. We find that relative factor supply and relative price changes are both important in explaining the growing return to skill. In particular, we find that capital accumulation and the fall in the price of traded goods served to increase the return to education.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6981.

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Date of creation: Feb 1999
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Handle: RePEc:nbr:nberwo:6981

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Cited by:
  1. Yoshinori Kurokawa, 2010. "A Survey of Trade and Wage Inequality: Anomalies, Resolutions, and New Trends," Tsukuba Economics Working Papers 2010-007, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba.
  2. Blum, Bernardo S., 2008. "Trade, technology, and the rise of the service sector: The effects on US wage inequality," Journal of International Economics, Elsevier, vol. 74(2), pages 441-458, March.
  3. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
  4. Atolia, Manoj & Yoshinori, Kurokawa, 2008. "Variety Trade and Skill Premium in a Calibrated General Equilibrium Model: The Case of Mexico," MPRA Paper 13698, University Library of Munich, Germany.

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