The choice of structural model in trade-wages decompositions
Abrego, Lisandro and Whalley, John (1999) The choice of structural model in trade-wages decompositions. Working Paper. Coventry: University of Warwick. Centre for the Study of Globalisation and Regionalisation. (Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)).
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This paper explores the use of structural models as an alternative to reduced form methods when decomposing observed joint trade and technology driven wage changes into components attributable to each source. Conventional mobile factors Heckscher-Ohlin models typically reveal problems of specialisation unless price changes accompanying trade shocks are small, and can also produce wide ranges for the decomposition for parameterisations consistent with the joint change. A differentiated goods model which generalises Heckscher-Ohlin removes problems of specialisation and concentrates the range of decompositions more narrowly, but introduces larger demand side responses to trade shocks which greatly reduce the effect of trade. The conclusion offered is that the choice of structural model matters for decomposing observed wage changes into trade and technology components, and that reduced-form methods which do not discriminate between alternative structural models may not be that informative for such decompositions.
|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):||Wage differentials -- Mathematical models, International trade, Technology transfer, Heckscher-Ohlin principle|
|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|
|Number of Pages:||33|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||European Commission (EC)|
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