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Trade and wage inequality: Local versus Global comparative advantages

Alessia Matano () and Paolo Naticchioni ()

No 6-DEISFOL, Working Papers - Dipartimento di Economia from Dipartimento di Economia, Sapienza University of Rome

Abstract: This paper shows that disentangling the local and global dimensions of trade can be crucial to get a better understanding of the trade impact on wage inequality. In particular, it allows us to reconcile the empirical evidence with the Heckscher-Ohlin-Samuelson predictions. Our focus here is on Italy, which represents, in our opinion, an appropriate case study. As for local trade -within its own cone of diversification - Italy is specialized in the production of unskill-intensive goods, while for global trade -with respect to the other cone of diversification- it is mainly specialized in the production of skill-intensive goods. On the evidence of these specialization patterns, we point out that the local trade entails a strong impact on wage inequality. In particular, in line with the Heckscher-Ohlin-Samuelson predictions, the local export performance reduces wage inequality since it favours blue-collar workers. As for global trade, it affects and increases wage inequality through the export channel, again consistently with the Heckscher-Ohlin-Samuelson predictions.

Keywords: Trade Specialization; Wage Inequality; Skill Premium (search for similar items in EconPapers)
JEL-codes: F14 F16 J31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008, Revised 2008
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Related works:
Journal Article: Trade and Wage Inequality: Local versus Global Comparative Advantages (2010)
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