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Trade and Rising Wage Inequality: What can we learn from a Decade of Computable General Equilibrium Analysis?

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  • Niven Winchester

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    (Department of Economics, University of Otago)

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    Abstract

    This paper surveys computable general equilibrium (CGE) contributions to trade-wage debate. We conclude that this literature provides an avalanche of support for the view that trade has had only a minor influence on wage inequality through Heckscher-Ohlin channels. Moreover, some studies show that trade may be associated with declining wage inequality and/or reveal that North-North trade is responsible for a greater proportion of the increase in Northern wage inequality than North-South trade. The impact of trade-induced technical change, however, has received little attention in the CGE literature.

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    File URL: http://www.business.otago.ac.nz/econ/research/discussionpapers/DP_0606.pdf
    File Function: First version, 2006
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    Bibliographic Info

    Paper provided by University of Otago, Department of Economics in its series Working Papers with number 0606.

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    Length: 30 pages
    Date of creation: Oct 2006
    Date of revision: Oct 2006
    Handle: RePEc:otg:wpaper:0606

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    Keywords: computable general equilibrium modeling; trade and wages;

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    References

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    1. Francois, Joseph & Nelson, Doug R, 1998. "Trade, Technology and Wages: General Equilibrium Mechanics," CEPR Discussion Papers 1919, C.E.P.R. Discussion Papers.
    2. De Santis, Roberto A., 2002. "Wage inequality between and within groups: trade-induced or skill-bias technical change? Alternative age models for the UK," Economic Modelling, Elsevier, vol. 19(5), pages 725-746, November.
    3. Lisandro Abrego & John Whalley, 2003. "Goods market responses to trade shocks and trade and wages decompositions," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 747-757, August.
    4. Niven Winchester & David Greenaway & Geoffrey V. Reed, 2006. "Skill Classification and the Effects of Trade on Wage Inequality," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 287-306, July.
    5. Thierfelder, Karen & Robinson, Sherman, 2002. "Trade and the skilled-unskilled wage gap in a model with differentiated goods," TMD discussion papers 96, International Food Policy Research Institute (IFPRI).
    6. Abrego, Lisandro & Whalley, John, 2000. "The Choice of Structural Model in Trade-Wages Decompositions," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 462-77, August.
    7. Robert Z. Lawrence & Carolyn L. Evans, 1996. "Trade and Wages: Insights from the Crystal Ball," NBER Working Papers 5633, National Bureau of Economic Research, Inc.
    8. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
    9. Stephen Tokarick, 2005. "Quantifying the Impact of Trade on Wages: the Role of Nontraded Goods," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 841-860, November.
    10. Tyers, R. & Yang, Y., 1996. "Trade with Asia and Skill Upgrading: Effects on Factor Markets in the Older Industrial Countries," CEPR Discussion Papers 346, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    11. Roberto A. De Santis, 2003. "Wage Inequality in the United Kingdom: Trade and/or Technology?," The World Economy, Wiley Blackwell, vol. 26(6), pages 893-909, 06.
    12. Olivier Bontout & Sébastien Jean, 2000. "What Drove Relative Wages in France? Structural Decomposition Analysis in a General Equilibrium Framework, 1970-1992," Working Papers 2000-03, CEPII research center.
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    Cited by:
    1. Rod Tyers, 2013. "International Effects of China's Rise and Transition: Neoclassical and Keynesian Perspectives," CAMA Working Papers 2013-44, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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