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Foreign Competition and Wage Inequality

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  • J Peter Neary

    (University College Dublin)

Abstract

I argue that increased foreign competition can affect technical choice and skill differentials even when actual imports do not rise significantly. I present a model of General Oligopolistic Equilibrium ("GOLE") in which a reduction in import barriers (whether technological or policy-imposed) encourages more strategic investment by incumbent firms. The predictions accord with many of the stylised facts - higher skill premia; higher ratios of skilled to unskilled workers employed in all sectors and throughout the economy; little change in import volumes or prices; and rapid technological progress with rather little change in total factor productivity.

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File URL: http://www.ucd.ie/economics/research/papers/2001/WP01.02.pdf
File Function: First version, 2001
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200102.

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Length: 28 pages
Date of creation: 19 Jan 2001
Date of revision:
Handle: RePEc:ucn:wpaper:200102

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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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Related research

Keywords: General Oligopolistic Equilibrium ("GOLE"); skill-biased technical progress; skill premia; strategic investment; trade and wages;

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  1. JASKOLD GABSZEWICZ, Jean & VIAL, Jean-Philippe, . "Oligopoly "à la Cournot" in a general equilibrium analysis," CORE Discussion Papers RP -106, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
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  9. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 533-54, December.
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  16. Brakman, Steven & Heijdra, Ben J., 2002. "The monopolistic competition revolution in retrospect," CCSO Working Papers 200215, University of Groningen, CCSO Centre for Economic Research.
  17. Spencer, Barbara J & Brander, James A, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 707-22, October.
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  19. J. Peter Neary, 2000. "Of Hype and Hyperbolas - Introducing the new Economic Geography," Working Papers 200019, School Of Economics, University College Dublin.
  20. Ekholm, Karolina & Midelfart, Karen Helene, 2005. "Relative wages and trade-induced changes in technology," European Economic Review, Elsevier, vol. 49(6), pages 1637-1663, August.
  21. Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS) 140, University of Warwick, Department of Economics.
  22. Paul Segerstrom & Elias Dinopoulos, 1999. "A Schumpeterian Model of Protection and Relative Wages," American Economic Review, American Economic Association, vol. 89(3), pages 450-472, June.
  23. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June.
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