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Are US Wages Really Determined by European Labor-Market Institutions?

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  • Meckl, Jürgen

    (Justus Liebig University, Giessen)

Abstract

This paper integrates institutionally determined wage rigidities into an otherwise standard Heckscher-Ohlin model of international trade. It accounts for differences in individual productivities and their implications for individual wage incomes and demand for education. Although preserving the factor-price-equalization property of the global equilibrium approach, the model does not support the view expressed by Davis (1998) that global equilibrium links insulate the US labor market from exogenous shocks. It provides a foundation of the derived from comparative studies that do not consistently account for the global general equilibrium links.

Suggested Citation

  • Meckl, Jürgen, 2005. "Are US Wages Really Determined by European Labor-Market Institutions?," IZA Discussion Papers 1817, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1817
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    References listed on IDEAS

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    1. Donald R. Davis & Trevor A. Reeve, 1997. "Human Capital, Unemployment, and Relative Wages in a Global Economy," NBER Working Papers 6133, National Bureau of Economic Research, Inc.
    2. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 2021. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 8, pages 163-234, World Scientific Publishing Co. Pte. Ltd..
    3. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
    4. A. B. Atkinson, 2001. "A Critique of the Transatlantic Consensus on Rising Income Inequality," The World Economy, Wiley Blackwell, vol. 24(4), pages 433-452, April.
    5. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
    6. Paul Hare, 2001. "Trade Policy During the Transition: Lessons from the 1990s," The World Economy, Wiley Blackwell, vol. 24(4), pages 433-452, April.
    7. Donald R. Davis & Trevor A. Reeve, 2002. "Human Capital, Unemployment and Relative Wages in a Global Economy," International Economic Association Series, in: David Greenaway & Richard Upward & Katharine Wakelin (ed.), Trade, Investment, Migration and Labour Market Adjustment, chapter 2, pages 7-27, Palgrave Macmillan.
    8. J. Peter Neary, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(3), pages 551-570.
    9. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, March.
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    More about this item

    Keywords

    skill-specific unemployment; wage rigidities; international trade; education;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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