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Foreign competition and wage inequality

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  • J. Peter Neary

Abstract

I argue that increased foreign competition can affect technical choice and skill differentials even when actual imports do not rise significantly. I present a model of General Oligopolistic Equilibrium ("GOLE") in which a reduction in import barriers (whethe technological or policy-imposed) encourages more strategic investment by incumbent firms. The predictions accord with many of the stylised facts: higher skill premia; higher ratios of skilled to unskilled workers employed in all sectors and throughout the economy; little change in import volumes or prices; and rapid technological progress with rather little change in total factor productivity. (Presidential address to the International Economics and Finance Society, presented at the AEA/ASSA meetings, New Orleans, January 2001.)

Suggested Citation

  • J. Peter Neary, 2001. "Foreign competition and wage inequality," Working Papers 200102, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200102
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    File URL: http://hdl.handle.net/10197/1270
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    More about this item

    Keywords

    General Oligopolistic Equilibrium (GOLE); Skill premia; Skill-biased technical progress; Strategic investment; Trade and wages; Competition; International; Wage differentials; Competition; Imperfect; Labor;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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