Non-homothetic preferences: Explaining unidirectional movements in wage differentials

Sattwik Santra

Journal of Development Economics, 2014, vol. 109, issue C, 87-97

Abstract: This paper explores the impact of trade on the relative returns to skill in the presence of non-homothetic preferences. In a general equilibrium model of trade in differentiated products, it is shown that, if consumers react to a rise in real income by increasing their demands of the relatively skill intensive commodity/ies, then real income gains associated with trade, increase the skilled–unskilled wage ratio. This result generalizes to trade driven by comparative advantages and to technological progress.

Keywords: Trade; Non-homothetic preferences; Relative wage; Skilled to unskilled wage inequality (search for similar items in EconPapers)
JEL-codes: F12 F16 J31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S030438781400042X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:109:y:2014:i:c:p:87-97

DOI: 10.1016/j.jdeveco.2014.03.012

Access Statistics for this article

Journal of Development Economics is currently edited by M. R. Rosenzweig

More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().