Imports and Wage Inequality, Reexamined

24 Pages Posted: 31 Aug 2021

See all articles by Julio Mancuso Tradenta

Julio Mancuso Tradenta

La Trobe University - Department of Economics & Finance

Christis G. Tombazos

Monash University - Department of Economics

Hee-Seung Yang

KDI School of Public Policy and Management

Date Written: April 14, 2021

Abstract

The pattern of U.S. imports has changed dramatically in recent decades, mainly because of an unprecedented rise in imports from China. This new pattern has coincided with a resurgence of increasing wage inequality between high-skill and low-skill labor which has reignited a long-standing interest in the possibility that imports drive inequality. We investigate this issue using a production theory approach. Unlike competing methodologies, our model accounts not only for the capacity of imports to displace, but to also stimulate, demand for domestic labor. Our results suggest that imports are not the culprit of wage inequality. Importantly, we find that imports from China foster wage-convergence rather than inequality. Our results further suggest that capital accumulation and technical change may well be the main causes of increasing inequality.

Keywords: Imports, Wage Inequality, United States, China

JEL Classification: F16, I24, E23, F14, E10

Suggested Citation

Mancuso Tradenta, Julio and Tombazos, Christis G. and Yang, Hee-Seung, Imports and Wage Inequality, Reexamined (April 14, 2021). Available at SSRN: https://ssrn.com/abstract=3912985 or http://dx.doi.org/10.2139/ssrn.3912985

Julio Mancuso Tradenta

La Trobe University - Department of Economics & Finance ( email )

Donald Whitehead Building: Level 3, DWB313
Department of Economics & Finance
Bundoora, Victoria 3086
Australia

Christis G. Tombazos (Contact Author)

Monash University - Department of Economics ( email )

Australia

Hee-Seung Yang

KDI School of Public Policy and Management ( email )

P.O. Box 184
Seoul, 130-868
Korea, Republic of (South Korea)

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