publication . Preprint . 2014

International Competition and Inequality: A Generalized Ricardian Model

Adolfo Figueroa;
Open Access
  • Published: 01 Jan 2014
Why does the gap in real wage rates persist between the First World and the Third World after so many years of increasing globalization? The standard neoclassical trade model predicts that real wage rates will be equalized with international trade, whereas the standard Ricardian trade model does not. Facts are thus consistent with the Ricardian model. However, this model leaves undetermined income distribution. The objective of this paper is to fill this gap by developing a generalized Ricardian model, in which labor productivity levels across countries are endogenous and the initial inequality of countries is the exogenous variable. The model is able to explain...
free text keywords: International competition, Labor productivity, Real wage rate, initial inequality, income distribution, Ricardian trade model.

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