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Skill Bias, Trade, and Wage Dispersion

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Author Info
Monte, Ferdinando

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Abstract

Wage ratios across different percentiles of the distribution have moved in parallel and then diverged in the U.S. in the last 50 years. I build a simple model of heterogeneous technology and workers that features complementarities in production and love-for-variety in consumption and identify the macro-, talent- and individual-specific components of the wage function. I build the theoretical counterparts of the observed wage ratios, and show that both skill-biased technical change and trade between identical countries can reproduce the observed pattern of wage dispersion. This fact arises from qualitatively similar local responses of the marginal vs. the total price of skills. I argue that intra-firm rent distribution can be used to disentangle these causes.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14719.

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Date of creation: 16 Apr 2009
Date of revision: 06 Oct 2009
Handle: RePEc:pra:mprapa:14719

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Related research
Keywords: intra-industry trade; skill-biased technical change; local change in inequality; intra- rm rent distribution.;

Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
D33 - Microeconomics - - Distribution - - - Factor Income Distribution
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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References listed on IDEAS
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  2. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, vol. 42(1-2), pages 3-31, February. [Downloadable!] (restricted)
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  5. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Rising Wage Inequality: The Role of Composition and Prices," Harvard Institute of Economic Research Working Papers 2096, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
  6. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September. [Downloadable!]
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  11. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May. [Downloadable!] (restricted)
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    Other versions:
  13. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 1-39, February. [Downloadable!] (restricted)
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    Other versions:
  15. Sattinger, Michael, 1979. "Differential Rents and the Distribution of Earnings," Oxford Economic Papers, Oxford University Press, vol. 31(1), pages 60-71, March. [Downloadable!] (restricted)
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    Other versions:
  21. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June. [Downloadable!] (restricted)
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  24. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November. [Downloadable!] (restricted)
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