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On wage-inequalities in the North and in the South

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  • Hing-Man Leung

Abstract

Northern, developed, skilled-labour rich countries have, in recent years, faced increasing competition from Southern, developing, unskilled-labour rich countries. Many have blamed the South for aggravating the wage-inequality in the North. We build a hybrid model with Heckscher-Ohlin and Ricardian characteristics to tackle this issue. Relative demand for the skilled-labour-intensive good (e.g. cars, computers and computer software) plays a bigger role here than elsewhere in the literature. We find the usual H-O mechanism leads to relative wage convergence, divergence or reversal depending on the relative strength of relative demand, technology and endowment effects. More provocative results arise from innovation/imitation considerations: Northern innovation aggravates Northern wage-inequality but alleviates Southern wage-inequality; Southern imitation alleviates Northern wage-inequality but aggravates Southern wage-inequality.

Suggested Citation

  • Hing-Man Leung, 1998. "On wage-inequalities in the North and in the South," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(3), pages 299-315.
    • Handle: RePEc:taf:jitecd:v:7:y:1998:i:3:p:299-315
    DOI: 10.1080/09638199800000016
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    References listed on IDEAS

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    1. Robert Z. Lawrence, 1994. "Trade, Multinationals, & Labor," NBER Working Papers 4836, National Bureau of Economic Research, Inc.
    2. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
    3. Paul Krugman & Robert Lawrence, 1993. "Trade, Jobs, and Wages," NBER Working Papers 4478, National Bureau of Economic Research, Inc.
    4. Edward E. Leamer, 1992. "Wage Effects of A U.S. - Mexican Free Trade Agreement," NBER Working Papers 3991, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Feng Dai & Songtao Wu & Ling Liang & Zifu Qin, 2016. "Bilateral Trade under Environmental Pressure: Balanced Growth," Journal of Industry, Competition and Trade, Springer, vol. 16(2), pages 209-231, June.
    2. Manoj Pant & Sugandha Huria, 2020. "Labour, Trade, and Wage Inequality: Some New Results," Working Papers 2043, Indian Institute of Foreign Trade.

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