Economics at your fingertips  

New Goods and Rising Skill Premium: A Theoretical Investigation

Chong Xiang ()

No 478, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: This paper examines the effects of new goods on the relative wages of skilled-labor and trade patterns in a two-cone Heckscher-Ohlin model and shows that: (i) new goods can be a valid theoretical explanation for the rising skill premium in the U.S. (ii) new goods have both domestic and international factor market effects, and their interplay determines the outcome and gives rise to surprising results; (iii) new goods that are “friendly” to the abundant (scarce) factors move the relative factor prices in the direction of convergence (divergence). The setup is general in the goods dimension so that the introduction of new goods is completely unrestricted, and the results apply to any one or any combination of the relative demand shocks for skilled labor. The results also apply when non-tradable goods are present.

Keywords: new goods; rising skill premium; international and domestic factor market effects; lens condition for factor price equalization; production set (search for similar items in EconPapers)
JEL-codes: J31 O30 (search for similar items in EconPapers)
Pages: 42 Pages
Date: 2002
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers from Research Seminar in International Economics, University of Michigan Contact information at EDIRC.
Bibliographic data for series maintained by FSPP Webmaster ().

Page updated 2021-12-05
Handle: RePEc:mie:wpaper:478