Abrego, Lisandro and Edwards, T. Huw (2002) The relevance of the Stolper-Samuelson theorem to the trade and wages debate. Working Paper. University of Warwick. Centre for the Study of Globalisation and Regionalisation, Coventry.

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Abstract

In this paper we investigate the powerful implications of the Stolper-Samuelson theorem, which uses the Heckscher-Ohlin model to predict strong links between changing trade prices and wage inequalities. We summarise recent work, which shows that these theoretical links are, in fact, far stronger than indicated by empirical evidence or simplified reduced-form regressions. We point out that the literature outlines many reasons to doubt the validity of the Heckscher-Ohlin model, and summarise various general equilibrium studies of advanced countries which indicate that relaxation of the assumptions of the Heckscher-Ohlin model can greatly undermine the Stolper-Samuelson conclusions. We conclude that, while increased trade with developing countries has probably played some part in the widening wage inequalities in the UK and USA, there is considerable doubt over how large this role is. There are good reasons for believing that, contrary to the usual conclusions of the Stolper-Samuelson literature, policies to assist the upskilling of the labour force have considerable potential in offsetting any negative effects of trade on wage inequality.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HD Industries. Land use. Labor
Divisions:	Faculty of Social Sciences > Centre for the Study of Globalisation and Regionalisation
Library of Congress Subject Headings (LCSH):	Stolper-Samuelson theorem, Heckscher-Ohlin principle, Wages -- Effect of international trade on, International trade
Series Name:	Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)
Publisher:	University of Warwick. Centre for the Study of Globalisation and Regionalisation
Place of Publication:	Coventry
Date:	May 2002
Number:	No.96/
Number of Pages:	27
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/2022

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