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Trade, technology, and the rise of the service sector: The effects on US wage inequality


  • Blum, Bernardo S.


This paper uses a multi-sector version of the Ricardo-Viner model of international trade to quantify empirically the effects of technological changes, international trade, changes in the sectoral composition of the economy, and other factors on the US wage premium. The main finding of the paper is that changes in the sectoral composition of the economy were the most important force behind the widening of the wage gap, accounting for about 60% of the relative increase in wages of skilled workers between 1970 and 1996. In essence, capital was reallocated to sectors where it is relatively complementary to skilled workers.

Suggested Citation

  • Blum, Bernardo S., 2008. "Trade, technology, and the rise of the service sector: The effects on US wage inequality," Journal of International Economics, Elsevier, vol. 74(2), pages 441-458, March.
  • Handle: RePEc:eee:inecon:v:74:y:2008:i:2:p:441-458

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    References listed on IDEAS

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    Cited by:

    1. Klein, Michael W. & Moser, Christoph & Urban, Dieter M., 2013. "Exporting, skills and wage inequality," Labour Economics, Elsevier, vol. 25(C), pages 76-85.
    2. Wolfgang Dauth & Sebastian Findeisen & Jens Suedekum, 2014. "The Rise Of The East And The Far East: German Labor Markets And Trade Integration," Journal of the European Economic Association, European Economic Association, vol. 12(6), pages 1643-1675, December.
    3. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
    4. Pamela Bombarda & Sarra Ben Yahmed, 2017. "Gender, Informal Employment and Trade Liberalization in Mexico," THEMA Working Papers 2017-03, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    5. Horst Raff & Nicolas Schmitt, 2016. "Manufacturers and retailers in the global economy," Canadian Journal of Economics, Canadian Economics Association, vol. 49(2), pages 685-706, May.
    6. Henze, Philipp, 2014. "Structural change and wage inequality: Evidence from German micro data," Center for European, Governance and Economic Development Research Discussion Papers 204, University of Goettingen, Department of Economics.
    7. Anwar, Sajid & Rice, John, 2009. "Labour mobility and wage inequality in the presence of endogenous foreign investment," Economic Modelling, Elsevier, vol. 26(6), pages 1135-1139, November.
    8. Cabral, René & García-Díaz, Rocío & Mollick, André Varella, 2016. "Does globalization affect top income inequality?," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 916-940.
    9. David H. Autor & David Dorn & Gordon H. Hanson & Jae Song, 2014. "Trade Adjustment: Worker-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 129(4), pages 1799-1860.
    10. Sun, Sizhong & Anwar, Sajid, 2015. "Taxation of labour, product varieties and skilled–unskilled wage inequality: Short run versus long run," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 250-257.
    11. Wei-Bin Zhang, 2011. "Global Economic Growth, Elastic Labor Supply, Knowledge Utilization And Creation With Learning-By-Doing," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 58, pages 497-512, november.
    12. Anwar, Sajid & Sun, Sizhong, 2015. "Taxation of labour income and the skilled–unskilled wage inequality," Economic Modelling, Elsevier, vol. 47(C), pages 18-22.
    13. repec:ilo:ilowps:456740 is not listed on IDEAS
    14. Kolev, Alexandre. & Saget, Catherine., 2010. "Are middle-paid jobs in OECD countries disappearing? : An overview," ILO Working Papers 994567403402676, International Labour Organization.
    15. Petit, Sylvain, 2016. "International trade in services and inequalities: Empirical evaluation and role of tourism services," MPRA Paper 75206, University Library of Munich, Germany.
    16. Cassette, Aurélie & Fleury, Nicolas & Petit, Sylvain, 2012. "Income Inequalities and International Trade in Goods and Services: Short- and Long-Run Evidence," MPRA Paper 75205, University Library of Munich, Germany.
    17. Zhang, Jingjing, 2013. "Factor mobility and skilled–unskilled wage inequality in the presence of internationally traded product varieties," Economic Modelling, Elsevier, vol. 30(C), pages 579-585.
    18. Michael W. Klein & Christoph Moser & Dieter M. Urban, 2010. "The Contribution of Trade to Wage Inequality: The Role of Skill, Gender, and Nationality," NBER Working Papers 15985, National Bureau of Economic Research, Inc.
    19. Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
    20. Mollick, André Varella, 2012. "Income inequality in the U.S.: The Kuznets hypothesis revisited," Economic Systems, Elsevier, vol. 36(1), pages 127-144.
    21. Szalavetz, Andrea, 2008. "A szolgáltatási szektor és a gazdasági fejlődés
      [The service sector and economic development]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 503-521.
    22. Åsa Johansson & Eduardo Olaberría, 2014. "Global Trade and Specialisation Patterns Over the Next 50 Years," OECD Economic Policy Papers 10, OECD Publishing.
    23. Åsa Johansson & Eduardo Olaberría, 2014. "Long-term Patterns of Trade and Specialisation," OECD Economics Department Working Papers 1136, OECD Publishing.

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