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Wages and endowments in a globalised world

Lorenzo Rotunno () and Adrian Wood

No 2015-W11, Economics Papers from Economics Group, Nuffield College, University of Oxford

Abstract: This paper explores empirically the relationship between relative wages and relative endowments of skilled and unskilled workers in open economies across the world. It reconciles different views about the role of national labour markets in wage determination when countries trade. The observed sensitivity of relative wages to variation in endowments in open economies, across countries and over time, is hard to reconcile with the standard HOS model. By contrast, this sensitivity is intrinsic to a more general (so labeled GHO) model in which, as shown by our results, the wage-endowment elasticity depends on the height of barriers to trade and on the share of wages in goods prices. In GHO, openness to trade reduces - rather than eliminates - the sensitivity of wages to variation in endowments.

Keywords: Heckscher-Ohlin; trade and wages; trade liberalisation (search for similar items in EconPapers)
JEL-codes: F11 F16 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2015-10-05
New Economics Papers: this item is included in nep-int
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