Trade and Wage Inequality: Local Versus Global Comparative Advantages

DE-ISFOL La Sapienza Discussion Papers No. 6, 2008

33 Pages Posted: 6 Feb 2010

See all articles by Alessia Matano

Alessia Matano

University of Rome I

Paolo Naticchioni

University of Rome I; University of Cassino

Multiple version iconThere are 2 versions of this paper

Date Written: July 2008

Abstract

This paper shows that disentangling the local and global dimensions of trade can be crucial to get a better understanding of the trade impact on wage inequality. In particular, it allows us to reconcile the empirical evidence with the Heckscher-Ohlin-Samuelson predictions. Our focus here is on Italy, which represents, in our opinion, an appropriate case study. As for local trade -within its own cone of diversification- Italy is specialized in the production of unskill-intensive goods, while for global trade -with respect to the other cone of diversification- it is mainly specialized in the production of skill-intensive goods. On the evidence of these specialization patterns, we point out that the local trade entails a strong impact on wage inequality. In particular, in line with the Heckscher-Ohlin-Samuelson predictions, the local export performance reduces wage inequality since it favours blue-collar workers. As for global trade, it affects and increases wage inequality through the export channel, again consistently with the Heckscher-Ohlin-Samuelson predictions.

Keywords: Trade specialization, Wage inequality, Skill premium

Suggested Citation

Matano, Alessia and Naticchioni, Paolo, Trade and Wage Inequality: Local Versus Global Comparative Advantages (July 2008). DE-ISFOL La Sapienza Discussion Papers No. 6, 2008. Available at SSRN: https://ssrn.com/abstract=1548645 or http://dx.doi.org/10.2139/ssrn.1548645

Alessia Matano

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

Paolo Naticchioni (Contact Author)

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

University of Cassino ( email )

Cassino
Italy

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