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Trade and Wage Inequality: Local versus Global Comparative Advantages

  • Alessia Matano
  • Paolo Naticchioni

This paper shows that disentangling the local and global dimensions of trade can be crucial to get a better understanding of the trade impact on wage inequality. In particular, it allows us to reconcile the empirical evidence with the Heckscher-Ohlin-Samuelson predictions. Our focus here is on Italy, which represents, in our opinion, an appropriate case study. As for local trade -within its own cone of diversification - Italy is specialized in the production of unskill-intensive goods, while for global trade -with respect to the other cone of diversification- it is mainly specialized in the production of skill-intensive goods. On the evidence of these specialization patterns, we point out that the local trade entails a strong impact on wage inequality. In particular, in line with the Heckscher-Ohlin-Samuelson predictions, the local export performance reduces wage inequality since it favours blue-collar workers. As for global trade, it affects and increases wage inequality through the export channel, again consistently with the Heckscher-Ohlin-Samuelson predictions.

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Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 33 (2010)
Issue (Month): 12 (December)
Pages: 1757-1787

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Handle: RePEc:bla:worlde:v:33:y:2010:i:12:p:1757-1787
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