Trade and market congestion: An explanation for widening skilled--unskilled wage differential

Sattwik Santra

The Journal of International Trade & Economic Development, 2012, vol. 21, issue 1, 115-129

Abstract: A model of trade with monopolistic competition is set up to explain unidirectional movements in skilled--unskilled wage differential observed in most parts of the world. With trade, an individual firm faces a higher number of competitors. This rise in the number of market participants requires each firm to spend higher amount of a skill intensive resource to survive in the global market consequently raising the relative demand for skilled labor and thereby increasing the skilled--unskilled wage ratio.

Date: 2012
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DOI: 10.1080/09638191003628318

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