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International Trade and American Wages in General Equilibrium, 1967-1995

In: The Impact of International Trade on Wages


  • James Harrigan


In the last quarter century, wage inequality has increased dramatically in the United States. At the same time, the United States has become more integrated into the world economy, relative prices of final goods have changed, the capital stock has more than doubled, and the labor force has become steadily more educated. This paper estimates a flexible, empirical, general equilibrium model of wage determination in an attempt to sort out the connections between these trends. Aggregate data on prices and quantities of imports, outputs, and factor supplies are constructed from disaggregate sources. The econometric analysis concludes that wage inequality has been partly driven by changes in relative factor supplies and relative final goods prices. In contrast, imports have played a negligible direct role.
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Suggested Citation

  • James Harrigan, 2000. "International Trade and American Wages in General Equilibrium, 1967-1995," NBER Chapters,in: The Impact of International Trade on Wages, pages 171-196 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:6193

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    References listed on IDEAS

    1. Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 285-326.
    2. Park, Jin Heum, 1996. "Measuring education over time: A comparison of old and new measures of eduction from the Current Population Survey," Economics Letters, Elsevier, vol. 50(3), pages 425-428, March.
    3. Harrigan, James, 1997. "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model," American Economic Review, American Economic Association, vol. 87(4), pages 475-494, September.
    4. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
    5. Donald J. Rousslang & Theodore To, 1993. "Domestic Trade and Transportation Costs as Barriers to International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 208-221, February.
    6. Jones, Ronald W & Scheinkman, Jose A, 1977. "The Relevance of the Two-Sector Production Model in Trade Theory," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 909-935, October.
    7. R. E. Baldwin & G. G. Cain, "undated". "Shifts in U.S. Relative Wages: The Role of Trade, Technology, and Factor Endowments," Institute for Research on Poverty Discussion Papers 1132-97, University of Wisconsin Institute for Research on Poverty.
    8. Wolak, Frank A., 1989. "Testing inequality constraints in linear econometric models," Journal of Econometrics, Elsevier, vol. 41(2), pages 205-235, June.
    9. Leamer, E.E., 1995. "The Heckscher-Ohlin Model in Theory and Practice," Princeton Studies in International Economics 77, International Economics Section, Departement of Economics Princeton University,.
    10. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    11. Matthew J. Slaughter, 1998. "What Are the Results of Product-Price Studies and What Can We Learn From Their Differences?," NBER Working Papers 6591, National Bureau of Economic Research, Inc.
    12. Edward E. Leamer, 1996. "In Search of Stolper-Samuelson Effects on U.S. Wages," NBER Working Papers 5427, National Bureau of Economic Research, Inc.
    13. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-957, Sept.-Nov.
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    Cited by:

    1. Avraham Ebenstein & Ann Harrison & Margaret McMillan & Shannon Phillips, 2014. "Estimating the Impact of Trade and Offshoring on American Workers using the Current Population Surveys," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 581-595, October.
    2. Zeng, Dao-Zhi & Zhao, Laixun, 2010. "Globalization, interregional and international inequalities," Journal of Urban Economics, Elsevier, vol. 67(3), pages 352-361, May.
    3. Peter H. Lindert & Jeffrey G. Williamson, 2003. "Does Globalization Make the World More Unequal?," NBER Chapters,in: Globalization in Historical Perspective, pages 227-276 National Bureau of Economic Research, Inc.
    4. Strauss-Kahn, Vanessa, 2003. "Globalization and wage premia: reconciling facts and theory," MPRA Paper 20410, University Library of Munich, Germany.

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    JEL classification:

    • F1 - International Economics - - Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions


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