Foreign Competition and Wage Inequality

J. Peter Neary ()

No 3420, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: I argue that increased foreign competition can affect technical choice and skill differentials even when actual imports do not rise significantly. I present a model of General Oligopolistic Equilibrium (‘GOLE’) in which a reduction in import barriers (whether technological or policy-imposed) encourages more strategic investment by incumbent firms. The predictions accord with many of the stylised facts: higher skill premia; higher ratios of skilled to unskilled workers employed in all sectors and throughout the economy; little change in import volumes or prices; and rapid technological progress with rather little change in total factor productivity.

Keywords: general oligopolistic equilibrium (GOLE); skill premia; skill-based technical progress; strategic investment; trade and wages (search for similar items in EconPapers)
JEL-codes: F12 F16 J31 (search for similar items in EconPapers)
Date: 2002-06
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Working Paper: Foreign Competition and Wage Inequality (2001)
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