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Trade and market congestion: An explanation for widening skilled--unskilled wage differential


  • Sattwik Santra


A model of trade with monopolistic competition is set up to explain unidirectional movements in skilled--unskilled wage differential observed in most parts of the world. With trade, an individual firm faces a higher number of competitors. This rise in the number of market participants requires each firm to spend higher amount of a skill intensive resource to survive in the global market consequently raising the relative demand for skilled labor and thereby increasing the skilled--unskilled wage ratio.

Suggested Citation

  • Sattwik Santra, 2012. "Trade and market congestion: An explanation for widening skilled--unskilled wage differential," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(1), pages 115-129, January.
  • Handle: RePEc:taf:jitecd:v:21:y:2012:i:1:p:115-129
    DOI: 10.1080/09638191003628318

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