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Trade Liberalization, Skill-linked Intermediate and Two-sided Wage Gap

Author

Listed:
  • Sugata Marjit

    (City University of Hong Kong)

  • Rajat Achryya

Abstract

An interesting contemporary research question in trade theory deals with the possibility of rising wage inequality across the globe. A few possible explanations have been provided so far. We provide a natural explanation and a rigorous proof of the phenomenon by arguing that liberalizing trade in skill-linked intermediate product is likely to increase skilled-unskilled wage gap across the globe. Our model has the feature that a trade-induced shock can reduce the price of the skill-intensive traded good and raise the skilled-unskilled wage gap at the same time.

Suggested Citation

  • Sugata Marjit & Rajat Achryya, 2005. "Trade Liberalization, Skill-linked Intermediate and Two-sided Wage Gap," Trade Working Papers 22893, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:tradew:22893
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    File URL: http://www.eaber.org/node/22893
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    More about this item

    Keywords

    liberalization; Skill-linked Intermediate; North-South Trade;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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