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Wage Differential, Trade, Productivity Growth and Education

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  • Chang, Hsaio-chuan

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.

Suggested Citation

  • Chang, Hsaio-chuan, 1999. "Wage Differential, Trade, Productivity Growth and Education," Departmental Working Papers 2000-01, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2000-01
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    References listed on IDEAS

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    Cited by:

    1. Hsiao-chuan Chang, 2002. "Do Foreign Workers Have An Adverse Effect On The Native Unskilled Labor In Taiwan?," Department of Economics - Working Papers Series 837, The University of Melbourne.
    2. 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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