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A Survey of Trade and Wage Inequality: Anomalies, Resolutions, and New Trends

  • Yoshinori Kurokawa

This paper surveys recent studies on trade and wage inequality. We first introduce some trade-based explanations for increased wage inequality. There are, however, a number of criticisms of this line of thought based on the "trade-wage inequality anomaly," the "price-wage anomaly," and the small volume of trade. Mainly due to these criticisms, trade-based explanations for rising wage inequality have been limited in the economic literature. Rather, the primary explanations for wage inequality have been based on skill-biased technological change. Some trade models, however, have weakened the above criticisms, and more economists now argue that the effect of trade, though relatively small compared to that of technological change, is more significant than generally believed. Finally, we attempt to link new trends in inequality, such as job polarization and within-group inequality, to the trade and wage inequality literature.

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Paper provided by Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba in its series Tsukuba Economics Working Papers with number 2010-007.

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Date of creation: Sep 2010
Date of revision:
Handle: RePEc:tsu:tewpjp:2010-007
Contact details of provider: Postal: 1-1-1 Tennodai, Tsukuba, Ibaraki 305-8571
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  1. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
  2. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins of Technology-Skill Complementarity," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 693-732.
  3. Dinopoulos, Elias & Segerstrom, Paul, 1996. "A Schumpeterian Model of Protection and Relative Wages," Working Paper Series 471, Research Institute of Industrial Economics.
  4. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," NBER Working Papers 5693, National Bureau of Economic Research, Inc.
  5. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Investment, Outsourcing and Relative Wages," NBER Working Papers 5121, National Bureau of Economic Research, Inc.
  6. Borjas, George J & Ramey, Valerie A, 1994. "Time-Series Evidence on the," American Economic Review, American Economic Association, vol. 84(2), pages 10-16, May.
  7. Kurokawa, Yoshinori, 2006. "Trade and Variety-Skill Complementarity: A Simple Trade-Based Resolution of Wage Inequality Anomaly," MPRA Paper 14011, University Library of Munich, Germany.
  8. James Harrigan & Rita Balaban, 1999. "U.S. Wages in General Equilibrium: The Effects of Prices, Technology, and Factor Supplies, 1963-1991," NBER Working Papers 6981, National Bureau of Economic Research, Inc.
  9. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155, July.
  10. Nathalie Chusseau & Michel Dumont & Jo�l Hellier, 2008. "Explaining Rising Inequality: Skill-Biased Technical Change And North-South Trade ," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 409-457, 07.
  11. Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
  12. Lindquist, Matthew J., 2005. "Capital-Skill Complementarity and Inequality in Sweden," Working Paper Series 2/2005, Swedish Institute for Social Research.
  13. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  14. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
  15. Gordon H. Hanson & Ann Harrison, 1999. "Trade liberalization and wage inequality in Mexico," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(2), pages 271-288, January.
  16. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 358 - 392.
  17. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
  18. Zhu, Susan Chun & Trefler, Daniel, 2005. "Trade and inequality in developing countries: a general equilibrium analysis," Journal of International Economics, Elsevier, vol. 65(1), pages 21-48, January.
  19. Yoshinori Kurokawa, 2009. "Is a Skill Intensity Reversal a Mere Theoretical Curiosum? Evidence from the U.S. and Mexico," Tsukuba Economics Working Papers 2009-010, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba.
  20. 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.
  21. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  22. Eli Bekman & John Bound & Stephen Machin, 1998. "Implications of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1245-1279.
  23. repec:tpr:qjecon:v:123:y:2008:i:2:p:489-530 is not listed on IDEAS
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