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Competition, Trade and Wages

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  • J. Peter Neary

    (University College Dublin)

Abstract

I briefly review the empirical evidence in the trade and wages debate, which overwhelmingly rejects the Heckscher-Ohlin explanation for recent increases in OECD skill premia. I then argue that the same evidence is also difficult to reconcile in general equilibrium with the view that exogenous skill-biased technological progress is the sole culprit. Finally, I present a model of oligopolistic competition which is more consistent with the evidence. Removing quantitative import constraints (a metaphor for increased foreign competition) encourages both home and foreign firms to invest more aggressively, raising their demand for skilled labour even at unchanged relative wages.

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File URL: http://www.ucd.ie/economics/research/papers/2000/WP00.20.pdf
File Function: First version, 2000
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200020.

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Length: 29 pages
Date of creation: 25 Jun 2000
Date of revision:
Handle: RePEc:ucn:wpaper:200020

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Postal: UCD, Belfield, Dublin 4
Phone: +353-1-7067777
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics
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Keywords: OECD wage inequality; oligopolistic competition; skill-biased technological progress; skill premia; trade and wages;

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References

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Citations

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Cited by:
  1. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
  2. Ugo FRATESI, 2005. "Regional Policy from a Supra-Regional Perspective," Working Papers 245, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  3. Wilfred J. Ethier, 2002. "Globalization, Globalisation," Tinbergen Institute Discussion Papers 02-088/2, Tinbergen Institute.
  4. Donald Robbins, 2003. "The impact of trade liberalization upon inequality in developing countries - A review of theory and evidence-," DOCUMENTOS DE ECONOMÍA 003601, UNIVERSIDAD JAVERIANA - BOGOTÁ.
  5. Ekholm, Karolina & Ulltveit-Moe, Karen-Helene, 2001. "Relative Wages and Trade-Induced Changes in Technology," CEPR Discussion Papers 2677, C.E.P.R. Discussion Papers.
  6. Anthony C. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Working Paper Series 881, CESifo Group Munich.
  7. J. Peter Neary, 2000. "Monopolistic Competition and International Trade Theory," Working Papers 200025, School Of Economics, University College Dublin.
  8. Lionel Fontagné & Daniel Mirza, 2001. "International Trade and Rent Sharing in Developed and Developing countries," Working Papers 2001-09, CEPII research center.
  9. Ethier, Wilfred J., 2005. "Globalization, globalisation: Trade, technology, and wages," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 237-258.
  10. Denny, Kevin & Harmon, Colm & Lydon, Raemonn, 2002. "Cross Country Evidence on the Returns to Education: Patterns and Explanations," CEPR Discussion Papers 3199, C.E.P.R. Discussion Papers.
  11. Weiss, Pia & Wälde, Klaus, 2001. "Globalisation is good for you: Distributional effects of mergers caused by globalisation," Dresden Discussion Paper Series in Economics 07/01, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  12. repec:idb:brikps:8758 is not listed on IDEAS

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