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Trade and Relative Wage in a Global Economy

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  • Satya P. Das

Abstract

The effects of trade among similar countries and that among dissimilar countries on the relative wage are examined. Product quality is a choice variable by firms. Quantity production is assumed to satisfy constant costs, while quality production is more skilled‐labor intensive than quantity production and obeys increasing costs. Compared to autarky, free trade, by fostering more competition, leads to quality improvement, which in turn tends to increase the relative wage. Trade among similar countries increases the relative wage in all trading countries, while trade among dissimilar countries, in a two‐country model, increases it in one country but may increase or lower it in the other.

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  • Satya P. Das, 2003. "Trade and Relative Wage in a Global Economy," Review of International Economics, Wiley Blackwell, vol. 11(2), pages 397-411, May.
    • Handle: RePEc:bla:reviec:v:11:y:2003:i:2:p:397-411
    DOI: 10.1111/1467-9396.00390
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    4. Satya P. Das, 2005. "Gradual globalization and inequality between and within countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(3), pages 852-869, August.
    5. Sugata Marjit & Saibal Kar, 2013. "International Capital Flow, Vanishing Industries and Two-sided Wage Inequality," Pacific Economic Review, Wiley Blackwell, vol. 18(5), pages 574-583, December.

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