A Note on Wage Inequality, Technology, and Trade
Chu-Ping Lo
DOI: 10.4236/me.2011.23037   PDF    HTML     6,682 Downloads   10,574 Views   Citations


Zeira (2007) presents a two-country model of endogenous technology and trade, illustrating that trade liberalization reduces wage inequality in developing countries. The result contrasts the current outsourcing trade literature; the conflict is due to the critical assumption made in his model that “the most rewarding technologies are invested first.” If we relax this assumption, or allow the technology frontier to foster labor gains in all existing industries, then Zeira’s model is, in fact, consistent with the current outsourcing trade literature.

Share and Cite:

C. Lo, "A Note on Wage Inequality, Technology, and Trade," Modern Economy, Vol. 2 No. 3, 2011, pp. 340-343. doi: 10.4236/me.2011.23037.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] P. Antràs, L. Garicano and E. Rossi-Hansberg, “Offshoring in a Knowledge Economy,” Quarterly Journal of Economics, Vol. 121, No. 1, 2006, pp. 31-77.
[2] O. Attanasio, P. K. Goldberg and N. Pavcnik, “Trade Reforms and Wage Inequality in Colombia,” Journal of Development Economics, Vol. 74, No. 2, 2004, pp. 331- 366. doi:10.1016/j.jdeveco.2003.07.001
[3] H. Beyer, P. Rojas and R. Vergara, “Trade Liberalization and Wage Inequality,” Journal of Development Economics, Vol. 59, No. 1, 1999, pp. 103-123. doi:10.1016/S0304-3878(99)00007-3
[4] P. Epifani and G. Gino, “The Skill Bias of World Trade,” Economic Journal, Vol. 118, No. 530, 2008, pp. 927-960. doi:10.1111/j.1468-0297.2008.02156.x
[5] W. J. Ethier, “Globalisation: Trade, Technology, and Wages,” International Review of Economics and Finance, Vol. 14, No. 3, 2005, pp. 237-258. doi:10.1016/j.iref.2004.12.001
[6] R. C. Feenstra and G. H. Hanson, “Foreign Investment, Outsourcing and Relative Wages,” The Political Economics of Trade Policy: Papers in Honor of Jagdish Bhagwati, MIT Press, Cambridge, 1996, pp. 89-127.
[7] R. C. Feenstra and G. H. Hanson, “Foreign Direct Investment and Relative Wages: Evidence from Mexico’s Maquiladoras,” Journal of International Economics, Vol. 42, No. 3-4, 1997, pp. 371-393.
[8] G. M. Meier and J. E. Rauch, “Leading Issues in Economic Development,” Oxford University Press, New York and Oxford, 2000.
[9] J. Zeira, “Wage Inequality, Technology, and Trade,” Journal of Economic Theory, Vol. 137, No. 1, 2007, pp. 79-103. doi:10.1016/j.jet.2006.03.011

Copyright © 2024 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.