IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/1042.html
   My bibliography  Save this paper

Explaining Intra- and Intersectoral Wage Differentials in Simple General Equilibrium Trade Models

Author

Listed:
  • Spatz, Julius

Abstract

The labour markets in the developed countries have experienced two fundamental changes in recent years. Firstly, high-skilled workers have gained at the expense of low-skilled workers, which manifests itself in a rising skill premium and/or a rising disparity in the unemployment rates of these two skill groups. Secondly, sectors with low wage levels have expanded while sectors with high wage levels have contracted. By presenting two insider-outsider general equilibrium models, which analyse the impact of trade on both dimensions of income distribution, this paper seeks to contribute to the ongoing debate on whether the progressing globalisation of the world economy is to blame for these two trends. From this analysis, two important results emerge. Firstly, the distributional effects of trade are highly sensitive to even minor changes to the assumption of the 2 x 2 trade model. This suggests that due attention should be paid to the choice of the structural model. Secondly, there might be a bias inherent to the "mandated-wage approach" that makes most empirical studies fail to find a strong influence of trade on the skill premium.

Suggested Citation

  • Spatz, Julius, 2001. "Explaining Intra- and Intersectoral Wage Differentials in Simple General Equilibrium Trade Models," Kiel Working Papers 1042, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1042
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/17727/1/kap1042.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cooley, Thomas F, 1997. "Calibrated Models," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(3), pages 55-69, Autumn.
    2. Ruffin, Roy J., 2001. "Quasi-specific factors: worker comparative advantage in the two-sector production model," Journal of International Economics, Elsevier, vol. 53(2), pages 445-461, April.
    3. Wood, Adrian, 1998. "Globalisation and the Rise in Labour Market Inequalities," Economic Journal, Royal Economic Society, vol. 108(450), pages 1463-1482, September.
    4. R. E. Baldwin & G. G. Cain, "undated". "Shifts in U.S. Relative Wages: The Role of Trade, Technology, and Factor Endowments," Institute for Research on Poverty Discussion Papers 1132-97, University of Wisconsin Institute for Research on Poverty.
    5. Jonathan E. Haskel, 2000. "Trade and Labor Approaches to Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 397-408, August.
    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. Lawrence F. Katz & Lawrence H. Summers, 1989. "Industry Rents: Evidence and Implications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989 Micr), pages 209-290.
    8. Edward E. Leamer, 1996. "In Search of Stolper-Samuelson Effects on U.S. Wages," NBER Working Papers 5427, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nunnenkamp, Peter & Spatz, Julius, 2001. "Globalisierungsverlierer in der Automobilindustrie? Internationaler Wettbewerb und Arbeitsmarkteffekte in Deutschland, Japan und den Vereinigten Staaten," Open Access Publications from Kiel Institute for the World Economy 2608, Kiel Institute for the World Economy (IfW Kiel).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haskel, Jonathan & Slaughter, Matthew J, 2001. "Trade, Technology and U.K. Wage Inequality," Economic Journal, Royal Economic Society, vol. 111(468), pages 163-187, January.
    2. repec:eee:labchp:v:3:y:1999:i:pb:p:2215-2288 is not listed on IDEAS
    3. Lionel Fontagné & Daniel Mirza, 2001. "International Trade and Rent Sharing in Developed and Developing countries," Working Papers 2001-09, CEPII research center.
    4. Lisandro Abrego & John Whalley, 1999. "The Choice of Structural Model in Trade-Wages Decompositions," CSGR Working papers series 34/99, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
    5. Robbins, Donald J., 2003. "The impact of trade liberalization upon inequality in developing countries : a review of theory and evidence," ILO Working Papers 993650553402676, International Labour Organization.
    6. Peter Huber & Helmut Hofer, 2001. "Teilprojekt 9: Auswirkungen der EU-Erweiterung auf den österreichischen Arbeitsmarkt," WIFO Studies, WIFO, number 19839, March.
    7. Jonathan E. Haskel, 2000. "Trade and Labor Approaches to Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 397-408, August.
    8. Porto, Guido G., 2006. "Using survey data to assess the distributional effects of trade policy," Journal of International Economics, Elsevier, vol. 70(1), pages 140-160, September.
    9. Christis G. Tombazos, 2010. "Trade and Wage Inequality in a World of Incomplete Diversification," Chapters, in: Noel Gaston & Ahmed M. Khalid (ed.), Globalization and Economic Integration, chapter 8, Edward Elgar Publishing.
    10. Jonathan E. Haskel & Matthew J. Slaughter, 1998. "Does the Sector Bias of Skill-Biased Technical Change Explain Changing Wage Inequality?," NBER Working Papers 6565, National Bureau of Economic Research, Inc.
    11. Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Have Falling Tariffs and Transportation Costs Raised US Wage Inequality?," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 630-650, September.
    12. Ann L. Owen, 1999. "International Trade and the Accumulation of Human Capital," Southern Economic Journal, Southern Economic Association, vol. 66(1), pages 61-81, July.
    13. Jurgen Meckl & Benjamin Weigert, 2003. "Globalization, technical change and the skill premium: magnification effects from human - capital investments," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 319-336.
    14. Rita A. Balaban & James Harrigan, 1999. "U.S. wages in general equilibrium: the effects of prices, technology and factor supplies, 1963-1991," Staff Reports 64, Federal Reserve Bank of New York.
    15. Mr. Stephen Tokarick, 2002. "Quantifying the Impact of Tradeon Wages: The Role of Nontraded Goods," IMF Working Papers 2002/191, International Monetary Fund.
    16. Avraham Ebenstein & Ann Harrison & Margaret McMillan & Shannon Phillips, 2022. "Estimating The Impact Of Trade And Offshoring On American Workers Using The Current Population Surveys," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 12, pages 275-289, World Scientific Publishing Co. Pte. Ltd..
    17. James Harrigan, 2000. "International Trade and American Wages in General Equilibrium, 1967-1995," NBER Chapters, in: The Impact of International Trade on Wages, pages 171-196, National Bureau of Economic Research, Inc.
    18. Nathalie Chusseau & Michel Dumont & Joël Hellier, 2008. "Explaining Rising Inequality: Skill‐Biased Technical Change And North–South Trade," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 409-457, July.
    19. L Edwards, 2001. "Globalisation And The Skills Bias Of Occupational Employment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 69(1), pages 40-71, March.
    20. Hijzen, Alexander & Görg, Holger & Hine, Robert C., 2003. "International Fragmentation and Relative Wages in the UK," IZA Discussion Papers 717, Institute of Labor Economics (IZA).
    21. Thierfelder, Karen & Robinson, Sherman, 2002. "Trade and the skilled-unskilled wage gap in a model with differentiated goods," TMD discussion papers 96, International Food Policy Research Institute (IFPRI).

    More about this item

    Keywords

    trade; income distribution; real rigidities; insider-outsider model;
    All these keywords.

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:1042. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.