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- Publisher
- Wiley
- Copyright
- Copyright © 2011 Wiley Subscription Services, Inc., A Wiley Company
- ISSN
- 0008-4085
- eISSN
- 1540-5982
- DOI
- 10.1111/j.1540-5982.2010.01627.x
- Publisher site
- See Article on Publisher Site
Abstract
Abstract This paper examines the effects of trade liberalization between symmetric countries on the skill premium. I introduce skilled and unskilled labour in a model of trade with heterogeneous firms à la Melitz (2003) and assume a production technology such that more productive firms are more skill intensive. I show that the effects of trade liberalization on wage inequality crucially depend on the type of trade costs considered and on their initial size. While fixed costs of trade have a potentially non‐monotonic effect on the skill premium, a drop in variable trade costs unambiguously and substantially raises wage inequality.
Journal
Canadian Journal of Economics/Revue Canadienne D'économique – Wiley
Published: Feb 1, 2011
Keywords: ;