Abstract
Increased North-South, or developed-developing, trade and rising skilled-unskilled relative wages (or skill premiums) in the North are linked via two propositions widely used by trade economists — the Heckscher-Ohlin (HO) and Stolper-Samuelson (SS) theorems. Specifically, if the global economy is HO, and skilled and unskilled labour the factors of production, the skill-abundant North will export the skill intensive good and the unskilled-abundant South will export the unskilled intensive commodity. If, as has occurred in recent decades, there is an increase in the relative economic size of the South and/or trade frictions are reduced, then the relative price of skill intensive products will rise in the North. This price movement, in accordance with the SS theorem, will increase the skilled wage and decrease the unskilled wage.
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© 2008 Niven Winchester
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Winchester, N. (2008). Trade and Rising Wage Inequality: What Can We Learn from a Decade of Computable General Equilibrium Analysis?. In: Greenaway, D., Upward, R., Wright, P. (eds) Globalisation and Labour Market Adjustment. Palgrave Macmillan, London. https://doi.org/10.1057/9780230582385_4
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DOI: https://doi.org/10.1057/9780230582385_4
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