publication . Preprint . 2005

Trade Liberalization, Skill-linked Intermediate and Two-sided Wage Gap

Sugata Marjit; Rajat Achryya;
Open Access
  • Published: 01 Jan 2005
An interesting contemporary research question in trade theory deals with the possibility of rising wage inequality across the globe. A few possible explanations have been provided so far. We provide a natural explanation and a rigorous proof of the phenomenon by arguing that liberalizing trade in skill-linked intermediate product is likely to increase skilled-unskilled wage gap across the globe. Our model has the feature that a trade-induced shock can reduce the price of the skill-intensive traded good and raise the skilled-unskilled wage gap at the same time.
free text keywords: liberalization, Skill-linked Intermediate, North-South Trade, jel:F11, jel:F13, jel:J31
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