NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Can Inter-Industry Wage Differentials Justify Strategic Trade Policy?

Lawrence F. Katz, Lawrence H. Summers

NBER Working Paper No. 2739 (Also Reprint No. r1308)*
Issued in November 1989
NBER Program(s):   ITI    LS    IFM

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.

*Published: This paper was subsequently published as Can Interindustry Wage Differentials Justify Strategic Trade Policy?, Lawrence F. Katz, Lawrence H. Summers, in NBER book Trade Policies for International Competitiveness (1989)
NOTE: WP2739 is also the basis for R1261, "Industry Rents: Evidence and Implications." From Brookings Papers on Economic Activity: Microeconomics 1989, pp. 209-275, (1989).

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, a site with your domain name in ".GOV", or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

 
Publications
Activities
Meetings
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org