Effect of Trade on Wages
In this chapter, the central part of this book, estimates the effect of exports and imports between 1995 and 2005 on the relative wage of skilled labor to unskilled labor, represented by nonproduction to production workers and college graduates to high school graduates, by calculating the factor content of trade of 55 or 20 manufacturing industries using input-output tables and other data sources. The effect of trade between 1995 and 2000, for example, is estimated as the difference between the actual relative wage and the hypothetical or counterfactual relative wage that would have been realized if trade had remained at the 1995 level. The estimation reveals that trade from 1995 to 2005 was partly responsible for the widening wage inequality between nonproduction and production workers, although the effect was not dominant. As for wage inequality between college graduates and high school graduates, the estimated effect of trade on the widening gap was very large for females, while it was not consistent with the comparative advantage I had assumed for males.
KeywordsEffect of trade on wages Factor content of trade Wage inequality
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