Citation

Discussion Paper Details

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Full Details

Title: Competition, Trade and Wages

Author(s): J Peter Neary

Publication Date: March 2001

Keyword(s): OECD Wage Inequality, Oligopolistic Competition, Skill Premia, Skill-Biased Technological Progress and Trade And Wages

Programme Area(s): International Trade and Regional Economics

Abstract: I review briefly the empirical evidence in the trade and wages debate, which overwhelmingly rejects the Heckscher-Ohlin explanation for recent increases in OECD skill premia. I then argue that the same evidence is also difficult to reconcile in general equilibrium with the view that exogenous skill-biased technological progress is the sole culprit. Finally, I present a model of oligopolistic competition, which is more consistent with the evidence. Removing quantitative import constraints (a metaphor for increased foreign competition) encourages both home and foreign firms to invest more aggressively, raising their demand for skilled labour even at unchanged relative wages.

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Bibliographic Reference

Neary, J. 2001. 'Competition, Trade and Wages'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2732