Report

International trade and American wages in general equilibrium, 1967-1995

Abstract: In the last quarter century, wage inequality has increased dramatically in the United States. At the same time, the United States has become more integrated into the world economy, relative prices of final goods have changed, the capital stock has more than doubled, and the labor force has become steadily more educated. This paper estimates a flexible, empirical, general equilibrium model of wage determination in an attempt to sort out the connections between these trends. Aggregate data on prices and quantities of imports, outputs, and factor supplies are constructed from disaggregate sources. The econometric analysis concludes that wage inequality has been partly driven by changes in relative factor supplies and relative final goods prices. In contrast, imports have played a negligible direct role.

Keywords: Wages; International trade; Imports; Income distribution;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 1998

Number: 46