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International Trade and Real Wages

Author

Listed:
  • Adolfo Figueroa

    ( Departamento de Economía de la PUCP)

Abstract

The facts indicate that real wage rates tend to be homogenous within the First World, but they exhibit significant differences between the First World and the Third World. The standard neoclassical trade model predicts real wage equalization across countries. This prediction is consistent with the first fact, but is refuted by the second. On the other hand, the standard Ricardian model does not predict real wage equalization, so in principle these facts do not refute the model; however, it is unable to explain the wages-profits distribution. This paper proposes a generalized Ricardian trade model, which solves this theoretical difficulty. The generalized model is able to explain both facts about real wages and international trade. On epistemological grounds, the Ricardian theory proves to be superior to the neoclassical theory.

Suggested Citation

  • Adolfo Figueroa, 2017. "International Trade and Real Wages," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 40(80), pages 9-28.
    • Handle: RePEc:pcp:pucrev:y:2017:i:80:p:9-28
    as

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    File URL: https://revistas.pucp.edu.pe/index.php/economia/article/view/19793/19844
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    References listed on IDEAS

    as
    1. Alan V. Deardorff, 2011. "The possibility of factor price equalization, revisited," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 15, pages 155-163, World Scientific Publishing Co. Pte. Ltd..
    2. K. Doroodian & Chulho Jung, 1995. "Factor price equalization: revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 2(7), pages 223-226.
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