Competition, Trade and Wages

J. Peter Neary

No 2732, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: I review briefly the empirical evidence in the trade and wages debate, which overwhelmingly rejects the Heckscher-Ohlin explanation for recent increases in OECD skill premia. I then argue that the same evidence is also difficult to reconcile in general equilibrium with the view that exogenous skill-biased technological progress is the sole culprit. Finally, I present a model of oligopolistic competition, which is more consistent with the evidence. Removing quantitative import constraints (a metaphor for increased foreign competition) encourages both home and foreign firms to invest more aggressively, raising their demand for skilled labour even at unchanged relative wages.

Keywords: Oecd wage inequality; Oligopolistic competition; Skill-biased technological progress; Skill premia; Trade and wages (search for similar items in EconPapers)
JEL-codes: F12 F16 J31 (search for similar items in EconPapers)
Date: 2001-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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