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Policy Implications of the Trade and Wages Debate


  • Deardorff, Alan V


This paper examines the choice of policies to redistribute income in response to an increase in inequality caused by a rise in the differential wage paid to skilled labor compared with unskilled labor. The main issue is whether the appropriate policy response depends on whether the cause of the increased skill differential is "trade"--increased competition with low-skilled workers abroad--or technological change. The analysis is conducted within the context of a two-sector Heckscher-Ohlin trade model augmented to allow endogenous determination of the level of skill. Copyright 2000 by Blackwell Publishing Ltd.

Suggested Citation

  • Deardorff, Alan V, 2000. "Policy Implications of the Trade and Wages Debate," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 478-496, August.
  • Handle: RePEc:bla:reviec:v:8:y:2000:i:3:p:478-96

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    References listed on IDEAS

    1. Greenaway, David & Hine, Robert C. & Wright, Peter, 1999. "An empirical assessment of the impact of trade on employment in the United Kingdom," European Journal of Political Economy, Elsevier, vol. 15(3), pages 485-500, September.
    2. Dominique Pianelli & Georges Sokoloff, 1999. "Groupe d'Échanges et de Réflexion sur la Caspienne," Working Papers 1999-15, CEPII research center.
    3. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    4. Donald R. Davis, 1996. "Does European Unemployment Prop up American Wages?," NBER Working Papers 5620, National Bureau of Economic Research, Inc.
    5. 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.
    6. Matthew J. Slaughter, 1997. "International Trade and Labor-Demand Elasticities," NBER Working Papers 6262, National Bureau of Economic Research, Inc.
    7. Hélène Erkel-Rousse & Daniel Mirza, 2002. "Import price elasticities: reconsidering the evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 35(2), pages 282-306, May.
    8. Faini, Riccardo & Falzoni, Anna M & Galeotti, Marzio & Helg, Rodolfo & Turrini, Alessandro Antonio, 1998. "Importing Jobs or Exporting Firms? A Close Look at the Labour Market Implications of Italy's Trade and Foreign Direct Investment Flows," CEPR Discussion Papers 2033, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Harris, Richard G. & Robertson, Peter E., 2013. "Trade, wages and skill accumulation in the emerging giants," Journal of International Economics, Elsevier, vol. 89(2), pages 407-421.
    2. Dumont, Michel, 2004. "The Impact of International Trade with Newly Industrialised Countries on the Wages and Employment of Low-Skilled and High-Skilled Workers in the European Union," MPRA Paper 83525, University Library of Munich, Germany.
    3. Kar, Saibal & Beladi, Hamid, 2004. "Skill formation and international migration: welfare perspective of developing countries," Japan and the World Economy, Elsevier, vol. 16(1), pages 35-54, January.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D30 - Microeconomics - - Distribution - - - General


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