Trade and Inequality in Developing Countries: An Empirical Assessment

Susan Chun Zhu () and Daniel Trefler

No 535, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: Developing and newly industrialized countries that have experienced the sharpest increases in wage inequality are those whose export shares have shifted towards more skill-intensive goods. We argue that this can be explained by technological catch-up. We develop this insight using a model that features both Ricardian and endowmentsbased comparative advantage. In this model Southern catch-up causes production of the least skill-intensive Northern goods to migrate South (where they become the most skill-intensive Southern goods). This raises wage inequality in both the South and the North. We provide empirical evidence that strongly supports this causal mechanism: Southern catch-up exacerbates Southern inequality by redirecting Southern export shares towards more skill-intensive goods

Keywords: international trade; inequality; Southern catch-up (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-afr
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:red:sed004:535

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