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Ginis in General Equilibrium: Trade, Technology and Southern Inequality

  • Susan Chun Zhu
  • Daniel Trefler

Within developing and newly industrialized countries, rising wage inequality is both common and highly correlated with export growth. This is incompatible with the Stolper-Samuelson theorem, but suggestive of a role for technological catch-up. We develop this insight using a model that features both Ricardian and endowments-based comparative advantage. In this model Southern catch-up induces a correlation between rising inequality and export growth. It also induces a shift in trade patterns that results in skill upgrading and rising inequality in both the South and the North. A rudimentary empirical exercise reveals that, as predicted, Southern skill upgrading is correlated with the trade-weighted average rate of Southern catch-up.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8446.

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Date of creation: Aug 2001
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Handle: RePEc:nbr:nberwo:8446
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