This paper develops a gerteral equilibrium model for examining the impact of free trade on the wage inequality in the Northern economy and synthesizing the sersitivity of wage inequality indices to change in causal factors. The model has three types o...
This paper develops a gerteral equilibrium model for examining the impact of free trade on the wage inequality in the Northern economy and synthesizing the sersitivity of wage inequality indices to change in causal factors. The model has three types of labor, sector-specific high-skilled, mobile unskilled and immobile unskilled labor. Thus, three types of wage imequality indices are derived. The major findings are first, introducing heterogeneous classed of labor the overall wage inequality of the Nothern economy does not necessarily deteriorate whth free trade, second, expenditure shifts for the final good that is produced by high-skill content requirenents always lead to a rise in overall wage inequality, third, the sensitivity of the wage inequality indices to viased technological changes is greatly affected by factor mobility.