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Traded and Nontraded Goods and Real Wages

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  • Hamid Beladi
  • Ravi Batra

Abstract

The paper explains most, if not all, observations made by the empirical literature regarding the behavior of skilled and unskilled real wages in the United States, especially those since 1980. Generalizing the Stopler–Samuelson theorem, the authors show that the nontraded sector is critical to explaining the effects of changes in the price of traded goods on relative and absolute wages. Factor‐intensities play their role as in the traditional Stolper–Samuelson model, but the output of the nontraded sector matters as well. Specifically, freer trade benefits capital and hurts both the skilled and unskilled labor if the import as well as the nontraded sectors contract. This is a new result to the literature on Stolper–Samuelson issues.

Suggested Citation

  • Hamid Beladi & Ravi Batra, 2004. "Traded and Nontraded Goods and Real Wages," Review of Development Economics, Wiley Blackwell, vol. 8(1), pages 1-14, February.
    • Handle: RePEc:bla:rdevec:v:8:y:2004:i:1:p:1-14
    DOI: 10.1111/j.1467-9361.2004.00216.x
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    References listed on IDEAS

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    1. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 9(1), pages 58-73.
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    5. Chi-Chur Chao & Eden S. H. Yu, 1997. "Trade Liberalization in Oligopolistic Competition with Unemployment: A General Equilibrium Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 479-496, May.
    6. 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.
    7. Chao, Chi-Chur & Yu, Eden S H, 1999. "Profit-Sharing and International Capital Mobility in Developing Countries," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 744-752, November.
    8. Chinhui Juhn & Kevin M. Murphy, 1995. "Inequality in labor market outcomes: contrasting the 1980s and earlier decades," Economic Policy Review, Federal Reserve Bank of New York, issue Jan, pages 26-32.
    9. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
    10. Batra, Ravi, 1992. "The Fallacy of Free Trade," Review of International Economics, Wiley Blackwell, vol. 1(1), pages 19-31, November.
    11. William R. Cline, 1997. "Trade and Income Distribution," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 58, April.
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    Cited by:

    1. Sugata Marjit & Manoj Pant & Sugandha Huria, 2020. "Unskilled immigration, technical progress, and wages—Role of the household sector," Review of International Economics, Wiley Blackwell, vol. 28(1), pages 235-251, February.
    2. Oladi, Reza & Beladi, Hamid, 2010. "On technical progress and the boundary of non-traded goods," Mathematical Social Sciences, Elsevier, vol. 60(3), pages 204-209, November.
    3. Barua, Alokesh & Pant, Manoj, 2014. "Trade and wage inequality: A specific factor model with intermediate goods," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 172-185.
    4. Oladi, Reza & Beladi, Hamid, 2009. "Market interconnection and wages," Economics Letters, Elsevier, vol. 105(1), pages 117-119, October.
    5. Reza Oladi & John Gilbert & Hamid Beladi, 2011. "Foreign Direct Investment, Non‐Traded Goods And Real Wages," Pacific Economic Review, Wiley Blackwell, vol. 16(1), pages 36-41, February.
    6. Jeff P. Boone & Inder K. Khurana & K. K. Raman, 2011. "Litigation Risk and Abnormal Accruals," Working Papers 0020, College of Business, University of Texas at San Antonio.
    7. Galiani Sebastian & Heymann Daniel & Magud Nicolas E., 2017. "Income Distribution, Factor Endowments, and Trade Revisited: The Role of Non-Tradable Goods," Journal of Globalization and Development, De Gruyter, vol. 8(1), pages 1-20, June.
    8. Chi-Chur Chao & Eden Yu, 2015. "Housing Markets with Foreign Buyers," The Journal of Real Estate Finance and Economics, Springer, vol. 50(2), pages 207-218, February.
    9. Mukherjee, Soumyatanu, 2017. "Input trade reform and wage inequality," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 145-156.
    10. Beladi, Hamid & Oladi, Reza, 2011. "An elementary proposition on technical progress and non-traded goods," Journal of Mathematical Economics, Elsevier, vol. 47(1), pages 68-71, January.
    11. repec:ebl:ecbull:v:6:y:2007:i:30:p:1-8 is not listed on IDEAS
    12. Alokesh Baura & Priyanta Ghosh, 2015. "On Wage Inequality, Trade and Technology: Theory and Empirics," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 15-09, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    13. Chi‐Chur Chao & Bharat R. Hazari & Eden S. H. Yu, 2010. "Quotas, Spillovers, and the Transfer Paradox in an Economy with Tourism," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 243-249, May.
    14. Ravi Batra & Hamid Beladi & Reza Oladi, 2013. "Technical Progress and Real Wages Once again," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 506-518, August.
    15. Reza Oladi & Hamid Beladi, 2008. "Non-traded Goods, Technical Progress and Wages," Open Economies Review, Springer, vol. 19(4), pages 507-515, September.
    16. Hazari, Bharat & Mohan, Vijay, 2015. "Social exclusion, capital accumulation and inequality," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 371-375.
    17. Xu, Yun & Ouyang, Alice Y., 2017. "Tariffs, relative prices and wage inequality: Evidence from China," China Economic Review, Elsevier, vol. 46(C), pages 97-109.
    18. Reza Oladi & Hamid Beladi, 2007. "International Migration and Real Wages," Economics Bulletin, AccessEcon, vol. 6(30), pages 1-8.
    19. Chao, Chi-Chur & Lu, Lee-Jung & Lai, Ching-Chong & Hu, Shih-Wen & Wang, Vey, 2013. "Devaluation, pass-through and foreign reserves dynamics in a tourism economy," Economic Modelling, Elsevier, vol. 30(C), pages 456-461.
    20. Choi, Yoonho & Jin, Hailong & Choi, E. Kwan, 2018. "Why are nontraded goods cheaper in poor countries?," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 210-219.

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