Trade Integration and Wage Inequality

Giancarlo Gandolfo

Chapter Chapter 17 in International Trade Theory and Policy, 2014, pp 365-408 from Springer

Abstract: Abstract The sharp increase in wage inequality observed from the 1990s has stimulated a lively debate concerning the causes of this phenomenon. The inequality in question concerns the rise in the wage of skilled labour (typically college educated workers) relative to the wage of unskilled labour (workers without college education). A change in the skill premium may occur for various reasons but the fact that it occurred at a time of rising globalization makes international trade a prime suspect. In this chapter we study the possible links between trade integration and rising skill premium. All the main models that aim at explaining the skill premium are examined in depth. An important empirical result is that the skill premium has increased in skill abundant as well as in skill scarce countries: a fact that runs against the convergence of relative factor prices predicted by the standard Heckscher-Ohlin model.

Keywords: Skill Level; Relative Price; Skilled Labour; Trade Cost; Wage Inequality (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-642-37314-5_17

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DOI: 10.1007/978-3-642-37314-5_17

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