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Trade in Knowledge-Based Services; Factor Market Implications

Author

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  • Sang-Chul Yoon

    (Sogang University)

Abstract

Using a model of 'trade in knowledge-based services' (e-Trade), the paper presents that recently increased wage inequality in advanced economies primarily reflects intra-industry trade in knowledge-based services with other advanced economies. In order to highlight the effects of trade in knowledge-based services on the factor markets in the presence of digital marketplaces, the paper employs the Chamberlinian monopolistic competition theory of intra-industry trade in intermediate inputs. In this model, there will be welfare gains from intra-industry trades in knowledge-based services. However, e-Trade results in increased wage inequality between the skilled and unskilled labors in the presence of sector-specific productivity growth. As a result, it increases the skilled labors devoted to the service sector, and expands the size of the service/technology sector.

Suggested Citation

  • Sang-Chul Yoon, 2002. "Trade in Knowledge-Based Services; Factor Market Implications," Korean Economic Review, Korean Economic Association, vol. 18, pages 267-284.
    • Handle: RePEc:kea:keappr:ker-200212-18-2-04
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    More about this item

    Keywords

    e-Trade; intra-industry trade; knowledge-based services; monopolic competition; wage inequality;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • 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

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