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Foreign Competition and Wage Inequality

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  • Neary, J Peter

Abstract

I argue that increased foreign competition can affect technical choice and skill differentials even when actual imports do not rise significantly. I present a model of General Oligopolistic Equilibrium (‘GOLE’) in which a reduction in import barriers (whether technological or policy-imposed) encourages more strategic investment by incumbent firms. The predictions accord with many of the stylised facts: higher skill premia; higher ratios of skilled to unskilled workers employed in all sectors and throughout the economy; little change in import volumes or prices; and rapid technological progress with rather little change in total factor productivity.

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  • Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," CEPR Discussion Papers 3420, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3420
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    More about this item

    Keywords

    general oligopolistic equilibrium (GOLE); skill premia; skill-based technical progress; strategic investment; trade and wages;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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