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Technological Differences and the Impact of Trade on Wages


  • Jiro AKITA
  • Kwan Koo YUN


We introduce technological differences in a Heckscher-Ohlin model and study how the technology and endowment differences interact to determine the effects of trade on factor prices. When the endowment effect is dominant in determining the autarky relative factor prices, the relative factor prices of trading countries adjust in converging directions with trade if and only if the capital-rich country has a comparative advantage in the capital-intensive sector. Adjustments in converging directions could be excessive. Relative factor prices tend to converge if the technological comparative advantage is small for given relative endowments or if the relative endowment difference is large for a given technological comparative advantage.

Suggested Citation

  • Jiro AKITA & Kwan Koo YUN, 2004. "Technological Differences and the Impact of Trade on Wages," Econometric Society 2004 Far Eastern Meetings 757, Econometric Society.
  • Handle: RePEc:ecm:feam04:757

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    References listed on IDEAS

    1. Stewart, Douglas B, 1976. "Can Trade Widen the Difference between Factor Rewards? Another Look at the More-Goods-Than-Factors Case," American Economic Review, American Economic Association, vol. 66(4), pages 671-674, September.
    2. Deardorff, Alan V., 1986. "Firless firwoes: How preferences can interfere with the theorems of international trade," Journal of International Economics, Elsevier, vol. 20(1-2), pages 131-142, February.
    3. Rudiger Dornbusch & Stanley Fischer & Paul A. Samuelson, 1980. "Heckscher-Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 203-224.
    4. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters,in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc.
    5. Xu, Yingfeng, 1993. "A General Model of Comparative Advantage with Two Factors and a Continuum of Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 365-380, May.
    6. Gary Burtless, 1995. "International Trade and the Rise in Earnings Inequality," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 800-816, June.
    7. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    8. Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November.
    9. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
    10. Ronald W. Jones, 1997. "Trade, Technology and Income Distribution," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 32(2), pages 129-140, July.
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    More about this item


    factor-price convergence; comparative advantage; technological comparative advantage; skill premium;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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