The Choice of Structural Model in Trade-Wages Decompositions
CSGR Working Paper No. 34-99
33 Pages Posted: 19 Oct 1999
There are 2 versions of this paper
The Choice of Structural Model in Trade-Wages Decompositions
The Choice of Structural Model in Trade-Wages Decompositions
Date Written: May 1999
Abstract
This paper explores the use of structural models as an alternative to reduced form methods when decomposing observed joint trade and technology driven wage changes into components attributable to each source. Conventional mobile factors Heckscher-Ohlin models typically reveal problems of specialisation unless price changes accompanying trade shocks are small, and can also produce wide ranges for the decomposition for parameterisations consistent with the joint change. A differentiated goods model which generalises Heckscher-Ohlin removes problems of specialisation and concentrates the range of decompositions more narrowly, but introduces larger demand side responses to trade shocks which greatly reduce the effect of trade. The conclusion offered is that the choice of structural model matters for decomposing observed wage changes into trade and technology components, and that reduced-form methods which do not discriminate between alternative structural models may not be that informative for such decompositions.
JEL Classification: F10, J31
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
On the Labor Market Effects of Immigration and Trade
By George J. Borjas, Richard B. Freeman, ...
-
Shifts in U.S. Relative Wages: The Role of Trade, Technology and Factor Endowments
By Robert E. Baldwin and Glen G. Cain
-
What are the Results of Product-Price Studies and What Can We Learn from Their Differences?
-
Does the Sector Bias of Skill-Biased Technical Change Explain Changing Wage Inequality?