Trade, Wages, and Specific Factors*

doi:10.1111/j.1467-9396.2007.00693.x

If you are seeing this message, you may be experiencing temporary network problems. Please wait a few minutes and refresh the page. If the problem persists, you may wish to report it to your local Network Manager.

It is also possible that your web browser is not configured or not able to display style sheets. In this case, although the visual presentation will be degraded, the site should continue to be functional. We recommend using the latest version of Microsoft or Mozilla web browser to help minimise these problems.

Wiley InterScience

Review of International Economics

Volume 15 Issue 1, Pages 45 - 61

Published Online: 31 Jan 2007

International Economics and Finance Society

Go to Society Site

< Previous Abstract | Next Abstract >

Save Article to My Profile Download Citation Request Permissions

Abstract | References | Full Text: HTML, PDF (Size: 295K) | Related Articles | Citation Tracking

Trade, Wages, and Specific Factors*

Indro Dasgupta ¹ and Thomas Osang ²

¹ Mary Kay Inc., USA
² Southern Methodist University, USA

Dasgupta: Mary Kay Inc., Dallas, TX 75379, USA. Tel: 214-674-2764; E-mail: indrodasgupta@hotmail.com. Osang (corresponding author): Southern Methodist University, Dallas, TX 75275, USA. Tel: 214-768-4398; Fax: 214-768-1821; E-mail: tosang@mail.smu.edu.

* We would like to thank Alan Woodland, Jeffrey Campbell, an anonymous referee, as well as seminar participants at the Southeastern Economic Theory and International Trade Conference, the Midwest Economic Association Meetings, and the 8th World Congress of the Econometric Society for helpful comments and suggestions.

Abstract

In this paper, we use a multisector specific-factors model with sector-specific capital and two mobile factors, skilled and unskilled labor, to examine the effects of trade, technology, and factor endowments on the skill premium in US manufacturing industries. Based on this model and data for the US manufacturing sector from 1958–96, we calculate changes in the skill premium and then carry out a decomposition to identify the changes caused by product price changes (trade), technological progress, labor, and capital endowment changes. The decomposition reveals that trade effects, working through product price changes, caused the skill premium to increase moderately. Changes in capital endowments (new investments) had a positive effect on the skill premium, with the strongest impact during the 1980s, while the effect of technological change on the skill premium varied over time. Finally, changes in relative labor endowments had a negative effect on the skill premium.

DIGITAL OBJECT IDENTIFIER (DOI)

10.1111/j.1467-9396.2007.00693.x About DOI