Trade Imbalances, Export Structure and Wage Inequality

41 Pages Posted: 2 Jun 2014

See all articles by Rosario Crinò

Rosario Crinò

Catholic University of Milan

Paolo Epifani

Bocconi University - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: March 2014

Abstract

We study, both theoretically and empirically, how trade imbalances affect the structure of countries' exports and wage inequality. We show that, in a Heckscher-Ohlin model with a continuum of goods, a Southern (Northern) trade surplus leads to an increase (reduction) in the average skill intensity of exports, in the relative demand for skills and in the skill premium in both countries. We provide robust support for the mechanism underlying these predictions using a large panel of countries observed over the past 30 years. Our results suggest that the large and growing North-South trade imbalances arisen over the last three decades may have exacerbated wage inequality worldwide.

Keywords: Average Skill Intensity of Exports, North-South Trade Imbalances, skill premia

JEL Classification: F1

Suggested Citation

Crinò, Rosario and Epifani, Paolo, Trade Imbalances, Export Structure and Wage Inequality (March 2014). CEPR Discussion Paper No. DP9900, Available at SSRN: https://ssrn.com/abstract=2444922

Rosario Crinò

Catholic University of Milan ( email )

1 Largo A. Gemelli
Milano (Milan), MI Milano 20123
Italy

Paolo Epifani

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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