DP2091 Trade, Technology and UK Wage Inequality

Author(s): Jonathan Haskel, Matthew Slaughter
Publication Date: March 1999
Keyword(s): Technology, Trade, Wage Inequality
JEL(s): F1, J3, O3
Programme Areas: Labour Economics, International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2091

The U.K. skill premium fell from the 1950s to the late 1970s and then rose very sharply. This paper examines the contributions to these relative wage movements of international trade and technical change. We first measure trade as changes in product prices and technical change as TFP growth. Then we relate price and TFP changes to a set of underlying factors. Among a number of results, we find that changes in prices, not TFP, were the major force behind the rise in inequality in the 1980s. We also find that although increased trade pressure has raised technical change, its effect on wage inequality was not quantitatively significant.