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Wage Differential, Trade, Productivity Growth and Education

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  • Chang, Hsaio-chuan

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    Abstract

    There is a large literature on the link between wage differential, international trade and productivity growth. The theoretical and empirical research is mainly based on the Heckscher-Ohlin-Samuelson framework and on the cases of a large country. More comprehensive theoretical models are needed to guide further empirical research. This paper contributes to the debate by providing a dynamic intertemporal general equilibrium (DIGE) model incorporating endogenous skill formation. The result tends to support the argument that trade has a responsibility for wage differential. A cut in government education investment tends to raise wage differential. Productivity growth at best causes wage differential in the short run. From a theoretical perspective it is unclear whether productivity growth raises wage differential in the long run once the accumulation of skills is endogenized.

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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2000/Chang%202000.01.pdf
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    Bibliographic Info

    Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2000-01.

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    Length: 22 pages
    Date of creation: Nov 1999
    Date of revision:
    Handle: RePEc:pas:papers:2000-01

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    1. Edward E. Leamer, 1992. "Testing Trade Theory," NBER Working Papers 3957, National Bureau of Economic Research, Inc.
    2. Chen, Been-Lon & Hsu, Mei, 2001. "Time-Series Wage Differential in Taiwan: The Role of International Trade," Review of Development Economics, Wiley Blackwell, vol. 5(2), pages 336-54, June.
    3. Turrini, Alessandro, 1998. "Endogenous education policy and increasing income inequality between skilled and unskilled workers," European Journal of Political Economy, Elsevier, vol. 14(2), pages 303-326, May.
    4. W. J. McKibbin & P. J. Wilcoxen, . "The Theoretical and Empirical Structure of the G-Cubed Model," Discussion Papers 118, Brookings Institution International Economics.
    5. Paul Krugman, 1995. "Technology, Trade, and Factor Prices," NBER Working Papers 5355, National Bureau of Economic Research, Inc.
    6. Paul Krugman & Robert Lawrence, 1993. "Trade, Jobs, and Wages," NBER Working Papers 4478, National Bureau of Economic Research, Inc.
    7. J. N. Bhagwati & T. N. Srinivasan, 1975. "Education in a 'Job Ladder' Model and the Fairness-in-Hiring Rule," Working papers 159, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
    9. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
    10. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
    11. Phillip Swagel & Matthew J. Slaughter, 1997. "The Effect of Globilization on Wages in the Advanced Economies," IMF Working Papers 97/43, International Monetary Fund.
    12. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155, July.
    13. Edward E. Leamer, 1992. "Wage Effects of A U.S. - Mexican Free Trade Agreement," NBER Working Papers 3991, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Hsiao-chuan Chang, 2002. "Are Foreign Workers Responsible For The Increasing Unemployment Rate In Taiwan?," Department of Economics - Working Papers Series 853, The University of Melbourne.

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