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Foreign Competition and Wage Inequality

  • Neary, J Peter

The author argues that increased foreign competition can affect technical choice and skill differentials even when actual imports do not rise significantly. A model is presented 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 stylized 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. Copyright 2002 by Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 10 (2002)
Issue (Month): 4 (November)
Pages: 680-93

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Handle: RePEc:bla:reviec:v:10:y:2002:i:4:p:680-93
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  8. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
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  17. J. Peter Neary & Dermot Leahy, 1998. "Strategic trade and industrial policy towards dynamic oligopolies," LSE Research Online Documents on Economics 20246, London School of Economics and Political Science, LSE Library.
  18. 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.
  19. Hilde Vandenbussche & Jozef Konings, 1998. "Globalization and the effects of national versus international competition on the labour market. Theory and evidence from Belgian firm level data," Working Papers Department of Economics ces9821, KU Leuven, Faculty of Economics and Business, Department of Economics.
  20. Mathias Thoenig, 2000. "Trade Induced Technical Bias and Wage Inequalities: A Theory of Defensive Innovation," Econometric Society World Congress 2000 Contributed Papers 1931, Econometric Society.
  21. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
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