U.S. Wages in General Equilibrium: the Effects of Prices, Technology, and Factor Supplies, 1963-1991

50 Pages Posted: 11 Jun 2000 Last revised: 12 Oct 2010

See all articles by James Harrigan

James Harrigan

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Rita A. Balaban

University of Pittsburgh - Department of Economics; Samford University - School of Business

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Date Written: February 1999

Abstract

Wage inequality in the United States has increased, and many suspect that the main causes are changes in technology, international competition, and factor supplies. Our empirical model estimates the general equilibrium relationship between wages and technology, prices, and factor supplies. The model is based on the neoclassical theory of production, and is implemented by assuming that GDP is a function of prices, technology levels, and supplies of capital and different types of labor. We find that relative factor supply and relative price changes are both important in explaining the growing return to skill. In particular, we find that capital accumulation and the fall in the price of traded goods served to increase the return to education.

Suggested Citation

Harrigan, James and Balaban, Rita A., U.S. Wages in General Equilibrium: the Effects of Prices, Technology, and Factor Supplies, 1963-1991 (February 1999). NBER Working Paper No. w6981. Available at SSRN: https://ssrn.com/abstract=226408

James Harrigan (Contact Author)

University of Virginia - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Rita A. Balaban

University of Pittsburgh - Department of Economics

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Samford University - School of Business

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Dept. of Economics
Birmingham, AL 35229
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