Trade and rising wage inequality: What can we learn from a decade of computable general equilibrium analysis?

Abstract

This paper surveys computable general equilibrium (CGE) contributions to tradewage debate. We conclude that this literature provides an avalanche of support for the view that trade has had only a minor influence on wage inequality through Heckscher-Ohlin channels. Moreover, some studies show that trade may be associated with declining wage inequality and/or reveal that North-North trade is responsible for a greater proportion of the increase in Northern wage inequality than North-South trade. The impact of trade-induced technical change, however, has received little attention in the CGE literature.