Technology, Trade, and Factor Prices

49 Pages Posted: 29 Jun 2000 Last revised: 21 Aug 2022

See all articles by Paul R. Krugman

Paul R. Krugman

Princeton University - Princeton School of Public and International Affairs; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: November 1995

Abstract

A number of recent studies appear to show that international trade is a secondary factor in the growing inequality of wages, with technology probably the main culprit. These studies have, however, been subjected to severe and in some cases harshly worded criticism by trade theorists, who argue that the authors of these studies have misspecified the impacts of both technology and trade on factor prices. This paper shows that it is the critics who are confused. In particular, much recent discussion about technology, trade, and wages is marked by a failure to distinguish between the models we all use and the particular thought experiments we typically use to teach these models -- which happen not to be the appropriate thought experiments we need to analyze the real-world issues.

Suggested Citation

Krugman, Paul R., Technology, Trade, and Factor Prices (November 1995). NBER Working Paper No. w5355, Available at SSRN: https://ssrn.com/abstract=225418

Paul R. Krugman (Contact Author)

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