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International trade, technical change and wage inequality in the U.K. economy

  • Engelmann, Sabine
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    "This paper examines the joint impact of international trade and technical change on U.K. wages across different skill groups. International trade is measured as changes in product prices and technical change as total factor productivity (TFP) growth. We take account of a multi-sector and multi-factor of production economy and use mandated wage methodology to offer a close theoretical-empirical relationship. We use data of the EU KLEMS database and analyse the impact of both, product price changes and TFP changes of 11 U.K. manufacturing sectors on factor rewards of high-, medium- and low-skilled workers. Results show that real wages of skill groups are driven by the sector bias of price change and TFP growth of selected sectors of production. Furthermore, for each year 1970-2005 we estimate the share of the three different skill groups on added value which indicate structural change in the U.K. economy. Empirical results show a structural change in the U.K. economy by the declined share of low-skilled workers and the increased share of medium-skilled and high-skilled workers over the years." (Author's abstract, IAB-Doku) ((en))

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    Paper provided by Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] in its series IAB Discussion Paper with number 201208.

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    Length: 29 pages
    Date of creation: 20 Mar 2012
    Date of revision:
    Handle: RePEc:iab:iabdpa:201208
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    1. Orazio Attanasio & Pinelopi Goldberg & Nina Pavcnik, 2003. "Trade Reforms and Wage Inequiality in Colombia," NBER Working Papers 9830, National Bureau of Economic Research, Inc.
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    3. John Schmitt, 1993. "The Changing Structure of Male Earnings in Britain," CEP Discussion Papers dp0122, Centre for Economic Performance, LSE.
    4. Schmerer, Hans-Jörg, 2014. "Foreign direct investment and search unemployment: Theory and evidence," International Review of Economics & Finance, Elsevier, vol. 30(C), pages 41-56.
    5. Johnson, G.E. & Stafford, F.P., 1993. "International Competition and Real Wages," Working Papers 323, Research Seminar in International Economics, University of Michigan.
    6. Berman, E. & Bound, J. & Machin, S., 1997. "Implications of Skill-Biased Technological Change: International Evidence," Papers 25, Centre for Economic Performance & Institute of Economics.
    7. Poeschel, Friedrich, 2012. "The time trend in the matching function," IAB Discussion Paper 201203, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Jonathan Haskel & Matthew J. Slaughter, 1999. "Trade, Technology and U.K. Wage Inequality," NBER Working Papers 6978, National Bureau of Economic Research, Inc.
    9. Machin, S. & Van Reenen, J., 1997. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," Papers 24, Centre for Economic Performance & Institute of Economics.
    10. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 635-66, October.
    11. Lynn Karoly & Gary Burtless, 1995. "Demographic change, rising earnings inequality, and the distribution of personal well-being, 1959–1989," Demography, Springer, vol. 32(3), pages 379-405, August.
    12. Haskel, Jonathan E. & Slaughter, Matthew J., 2002. "Does the sector bias of skill-biased technical change explain changing skill premia?," European Economic Review, Elsevier, vol. 46(10), pages 1757-1783, December.
    13. Damien NEVEN. & Charles WYPLOSZ, 1996. "Relative Prices, Trade and Restructuring in European Industry," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9615, Université de Lausanne, Faculté des HEC, DEEP.
    14. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
    15. 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 909-35, October.
    16. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 533-54, December.
    17. Savin, N Eugene & White, Kenneth J, 1977. "The Durbin-Watson Test for Serial Correlation with Extreme Sample Sizes or Many Regressors," Econometrica, Econometric Society, vol. 45(8), pages 1989-96, November.
    18. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, October.
    19. Robert E. Baldwin & Glen G. Cain, 2000. "Shifts In Relative U.S. Wages: The Role Of Trade, Technology, And Factor Endowments," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 580-595, November.
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