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U.S. wage inequality and low-wage import competition

U.S. wage inequality and low-wage import competition
U.S. wage inequality and low-wage import competition
This article examines the impact of import competition from low-wage countries (LWCs) on wages and wage inequality in the U.S. over the period 1972-2006. During the 1990s, studies appeared to settle this issue, finding that technology, not trade, accounted for the bulk of rising inequality. This paper revisits the link between trade and wages, motivated by two changes in the structure of trade. First, trade today is shaped as much by the exchange of components and tasks as finished goods. Second, import volumes from LWCs into advanced economies like the U.S. have risen dramatically since the early 1990s. The paper pays special attention to the timing of trade impacts. Consistent with prior work, it shows that technological change is the primary driver of inequality before 1990. However, after 1990 wage inequality growth is chiefly a function of rising import competition from low-wage economies. To account for the growing fragmentation of production within economic sectors, we explore trade impacts using a panel model where the focus in on within- rather than between-industry shifts in inequality. Lags of key variables are used as instruments, and our results appear robust to broad concerns with endogeneity and to different measures of skill-biased technological change
0040-747X
1-38
Rigby, David
6b590eec-ab59-4fe6-8f6c-606bc40732a6
Kemeny, Thomas
b9e4ac0c-bc73-4905-8229-f970518cde88
Cooke, Abigail
d6d78cd6-14ba-43b9-8ee9-0c5e1492ac33
Rigby, David
6b590eec-ab59-4fe6-8f6c-606bc40732a6
Kemeny, Thomas
b9e4ac0c-bc73-4905-8229-f970518cde88
Cooke, Abigail
d6d78cd6-14ba-43b9-8ee9-0c5e1492ac33

Rigby, David, Kemeny, Thomas and Cooke, Abigail (2014) U.S. wage inequality and low-wage import competition. Tijdschrift voor Economische en Sociale Geografie, 1-38. (doi:10.1111/tesg.12123).

Record type: Article

Abstract

This article examines the impact of import competition from low-wage countries (LWCs) on wages and wage inequality in the U.S. over the period 1972-2006. During the 1990s, studies appeared to settle this issue, finding that technology, not trade, accounted for the bulk of rising inequality. This paper revisits the link between trade and wages, motivated by two changes in the structure of trade. First, trade today is shaped as much by the exchange of components and tasks as finished goods. Second, import volumes from LWCs into advanced economies like the U.S. have risen dramatically since the early 1990s. The paper pays special attention to the timing of trade impacts. Consistent with prior work, it shows that technological change is the primary driver of inequality before 1990. However, after 1990 wage inequality growth is chiefly a function of rising import competition from low-wage economies. To account for the growing fragmentation of production within economic sectors, we explore trade impacts using a panel model where the focus in on within- rather than between-industry shifts in inequality. Lags of key variables are used as instruments, and our results appear robust to broad concerns with endogeneity and to different measures of skill-biased technological change

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tradeandwagesrevised_final.pdf - Accepted Manuscript
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Accepted/In Press date: 2014
e-pub ahead of print date: 2014
Organisations: Economy, Society and Space

Identifiers

Local EPrints ID: 372136
URI: http://eprints.soton.ac.uk/id/eprint/372136
ISSN: 0040-747X
PURE UUID: 1b59f5bb-1b83-4983-af64-016bb0ce2194

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Date deposited: 01 Dec 2014 11:50
Last modified: 14 Mar 2024 18:32

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Contributors

Author: David Rigby
Author: Thomas Kemeny
Author: Abigail Cooke

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