Abrego, Lisandro and Whalley, John (1999) The choice of structural model in trade-wages decompositions. Working Paper. University of Warwick. Centre for the Study of Globalisation and Regionalisation, Coventry.

Preview

PDF WRAP_Abrego_wp3499.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (838Kb)

Abstract

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
Date:	May 1999
Number:	No.34/
Number of Pages:	33
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	European Commission (EC)
References:	Anderton, B. and P. Brenton (1998) “The Dollar, Trade, Technology and Wage Inequality in the USA,” Mimeo. Autor, D., L. Katz and A. Krueger (1998) “Computing Inequality: Have Computers Changed the Labor Market,” Quarterly Journal of Economics 113: 1169-1213. Baldwin, R.E. and G.G. Cain (1997) “Shifts in US Relative Wages: The Role of Trade, Technology and Factor Endowments,” NBER Working Paper No. 5934. Bhattarai, K., M. Ghosh and J. Whalley (1999) “On Some Properties of a Trade Closure Widely Used in Numerical Modelling. Economics Letters 62:13-21. Brenton, P.A. (1998) “Rising Trade and Falling Wages: A Review of the Theory and the Empirics,” in Brenton, P.A., and Pelkmans, J. (ed.), Globalization and European Workers. London: MacMillan, forthcoming. Berman, E., J. Bound and Z. Griliches (1994) “Changes in the Demand for Skilled Labour within US Manufacturing: Evidence from Annual Survey of Manufactures,” Quarterly Journal of Economics 109: 367-98. Blau, F. and L. Kahn (1996) “International Differences in Male Wage Inequality: Institutions versus Market Forces,” Journal of Political Economy 104: 791-836. Blonigen, B. and M. Slaughter (1999) “Foreign-Affiliate Activity and U.S. Skill Upgrading,” NBER Working Paper No. 7040. Borjas, G., R. Freeman and L. Katz (1991) “On the Labour Market Effects of Immigration and Trade,” in Borjas, G. and R. Freeman (eds.), Immigration and the Work Force. Chicago: The University of Chicago Press. Borjas, G., R. Freeman and L. Katz (1997) “How Much Do Immigration and Trade Affect Labour Market Outcomes?” Brookings Papers of Economic Activity: 1-85. Card, D. (1998) “Falling Union Membership and Rising Wage Inequality: What’s the Connection?” NBER Working Paper No. 6520. Davis, S. (1992) “Cross-Country Patterns of Changes in Relative Wages,” NBER Macroeconomics Annual: 239-91. Deardorff, A. and D.S. Hakura (1994) “Trade and Wages: What are the Questions,” in Bhagwati, J. and M. Kosters (eds.), Trade and Wages: Levelling Wages Down?. Washington: AEI Press. De Melo, J. and S. Robinson (1989) “Product Differentiation and the Treatment of Foreign Trade in Computable General Equilibrium Models of Small Economies.” Journal of International Economics 27: 47-67. Dewatripont, M., A. Sapir and K. Sekkat (1998) “ Labour Market Effects of Trade with LDCs in Europe." In Dewatripont, M., A. Sapir and K. Sekkat (eds.) Trade and Jobs in Europe: Much Ado about Nothing. Oxford: Clarendon Press. Feenstra, R. and Hanson, C. (1996) “Globalization, Outsourcing and Wage Inequality,” American Economic Review, May, 240-45. Francois, F. and D. Nelson (1998) “Trade, Technology and Wages: General Equilibrium Mechanics,” Economic Journal 108: 1483-1499. Fortin, M. and L. Thomas (1997) “Institutional Changes and and Rising Wage Inequality,” Journal of Economic Perspectives 11: 75-96. Gottschalk, P. and T. Smeeding (1997) “Cross National Comparisons of Earnings and Income Inequality,” Journal of Economic Literature 35: 633-87. Hamermesh, D.S. (1993) Labour Demand. Princeton: Princeton University Press. Harrigan, J. and R. Balaban (1999) “US Wages in General Equilibrium: The Effects of Prices, Technology, and Factor Supplies, 1963-1991,” NBER Working Paper No. 6981. Haskel, J. (1996) “Declining Wages for Unskilled Workers.” CEPR Discussion Paper No. 1490. Haskel, J. and M. Slaughter (1998) “Does the Sector Bias of Skilled-Biased Technical Change Explains Changing Wage Inequality,” NBER Working Paper No. 6565. Haskel, J. and M. Slaughter (1999) “Trade, Technology and U.K. Wage Inequality,” NBER Working Paper No. 6978. Johnson, H.G. (1966) “Factor Market Distortions and the Shape of the Transformation Frontier.” Econometrica 34: 686-98. Katz, L. and K. Murphy (1992) “Changes in Relative Wages, 1963-1987: Supply and Demand Factors,” Quarterly Journal of Economics 107: 35-78. Kosters, M. (1994) “An Overview of Changing Wage Patterns in the Labour Market,” in Bhagwati, J. and M. Kosters, op. cit. Krugman, P. and R. Lawrence (1993) “Trade, Jobs and Wages,” NBER Working Paper No. 4478. Lawrence, R. and M. Slaughter (1993) “International Trade and American Wages: Giant Sucking Sound or Small Hiccup,” Brookings Papers of Economic Activity 161:226. Leamer, E. (1996) “In Search of Stolper-Samuelson Effects on U.S. Wages,” NBER Working Paper 5427. Murphy, K. and F. Welch (1991), “The Role of International Trade in Wage Differentials,” in Koster, M. (ed.), Workers and Their Wages: Changing Patterns in the United States: Washington: AEI Press. Neven, D. and C. Wyplosz (1996) “Relative Prices, Trade and Restructuring in European Industry.” CEPR Discussion Paper No. 1451. OECD (1997) “Trade, Earning and Employment: Assessing the Impact of Trade with Emerging Economies on OECD Labour Markets,” Employment Outlook, OECD. Reinert, K. (1992) “Armington Elasticities for United States Manufacturing Sectors.” Journal of Policy Modelling 14: 631-39. Shiells, C. and K. Reinert (1993) “Armington Models and Terms of Trade Effects: Some Econometric Evidence for North America.” Canadian Journal of Economics 26: 299-316. Stern, R. M. et al. (1976) “Price Elasticities in International Trade: An Annotated Bibliography.” London: Macmillan. UNCTAD (1997) Trade and Development Report. Geneva: UNCTAD. Wood, A. (1994) North-South Trade, Employment and Inequality, Oxford: Clarendon Press. Wood, A. (1995) “How Trade Hurt Unskilled Workers,” Journal of Economic Perspectives 9: 57-80. Wood, A. (1997) “Opennes and Wage Inequality in Developing Countries: the Latin American Chalange to East Asian Convenitonal Wisdom,” World Bank Economic Review 11: 33-57. Wood, A. (1998b) “Globalisation and the Rise in Labour Market Inequalities,” Economic Journal 108: 1463-82.
URI:	http://wrap.warwick.ac.uk/id/eprint/2091

Request changes to a record

Actions (login required)

View Item