Can Inter-industry Wage Differentials Justify Strategic Trade Policy?, Issue 2739
National Bureau of Economic Research, 1988 - Commercial policy - 42 pages
This paper examines the relationship between labor market imperfections and trade policies. The available evidence suggests that pervasive industry wage differentials of up to 20 percent remain even after controlling for differences in observed measures of workers' skill and the effects of unions. Theoretical analysis indicates that given non-competitive wage differentials of this magnitude policies directed at encouraging employment in high-wage sectors could significantly enhance allocative efficiency. For the United States and other developed countries, such policies are more likely to involve export promotion than import substitution. Increased international trade flows (at least through 1984) have been associated with increased employment in high-wage U.S. manufacturing industries relative to low-wage U.S. manufacturing industries.
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Airbus allocative allocative efficiency American Andrei Shleifer argument capital intensive consumer surplus correlation Dickens and Katz dummy effects efficiency wage employee compensation evidence export and import export industries export intensive industries Export Worker firms high value added high wage industries high wage sectors import and export import penetration income redistribution increased industrial policy industry differentials Industry log wage industry wage differences industry wage differentials industry wage structure inter-industry wage differences inter-industry wage differentials Krueger and Summers Krugman labor market imperfections Labor Market Rents labor rents labor's share Lawrence H Log Wage Premium low-wage industries manufacturing sector marginal product monopoly rents nonunion sample occupation Ouartlle patterns percent policies directed present discounted value primary sector employment primary sector output product market imperfections relative wages rent seeking rents earned Robert Robert Stern secondary sector similar standard deviation Stiglitz strategic trade policy Table trade flows Typical union and nonunion United variable welfare