Trade and market congestion: An explanation for widening skilled--unskilled wage differential
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.
Volume (Year): 21 (2012)
Issue (Month): 1 (January)
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