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Policy Implications of the Trade and Wages Debate
Author(s) -
Deardorff Alan V.
Publication year - 2000
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00236
Subject(s) - economics , differential (mechanical device) , wage inequality , context (archaeology) , labour economics , wage , competition (biology) , technological change , free trade , commercial policy , inequality , differential effects , international economics , macroeconomics , medicine , paleontology , ecology , mathematical analysis , mathematics , engineering , biology , aerospace engineering
This paper examines the choice of policies to redistribute income in response to an increase in inequality caused by a rise in the differential wage paid to skilled labor compared with unskilled labor. The main issue is whether the appropriate policy response depends on whether the cause of the increased skill differential is ‘trade’—increased competition with low‐skilled workers abroad—or technological change. The analysis is conducted within the context of a two‐sector Heckscher–Ohlin trade model augmented to allow endogenous determination of the level of skill.