Technology, trade, and increasing inequality: does the cause matter for the cure?
Author: Deardorff, AV
Source: Journal of International Economic Law, Volume 1, Number 3, September 1998 , pp. 353-376(24)
Publisher: Oxford University Press
Abstract:This paper addresses an issue that has received a great deal of attention in recent years, both from international trade economists and from labor economists: What has caused the relative wage of skilled labor compared to unskilled labor in the USA to increase through the 1980s and 1990s? Prime candidates for causing this change have been 'trade' - the increased competition of US workers with unskilled workers abroad - and 'technology' - new products and processes that may have increased the productivity of skilled workers or skill-intensive industries relative to their unskilled counterparts. The paper reviews what has happened to relative wages and the explanations that have been suggested. A brief look at the empirical evidence from this literature is suggestive, but hardly conclusive. But the paper then asks whether the answer to this question really matters. It turns out that the appropriate policies for dealing with this change in relative wages do not depend on whether the cause of the change has been trade or technology. The paper concludes with an argument about the first-best policy for dealing with the increased wage differential, but also with some skepticism that any policy at all is needed.
Document Type: Research article
Publication date: 1998-09-01
- The Journal of International Economic Law is dedicated to encouraging thoughtful and scholarly attention to a very broad range of subjects that concern the relation of law to international economic activity, by providing the major English language medium for publication of high-quality manuscripts relevant to the endeavours of scholars, government officials, legal professionals and others. The emphasis will be on fundamental, long-term, systemic problems and possible solutions, in the light of empirical observations and experience, as well as theoretical and multi-disciplinary approaches. It is expected, therefore, that the journal's contents will potentially influence real events and provide important critiques of policies, negotiations, or court and tribunal cases. In this manner the journal should contribute modestly to promoting peace, world welfare and enhancement of the quality of life for all peoples.