NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Foreign Competition, Market Power and Wage Inequality: Theory and Evidence

George J. Borjas, Valerie A. Ramey

NBER Working Paper No. 4556
Issued in November 1993
NBER Program(s):   LS

In this paper, we present theory and evidence on the link between wage inequality and foreign competition in concentrated industries. We develop a simple model in which the impact of foreign competition on the relative wages of an economy depends on the market structure of the industry penetrated. We show that the more concentrated is the industry, the greater is the impact of trade on general wage inequality. We use the theory to argue why import competition in an industry such as automobiles is much more deleterious to the wages of the less educated than import competition in an industry such as apparel. We then test our hypothesis using a panel data set on relative wages across SMSAs. We reinterpret our model as a model of local economies, and test it using both the cross-sectional and time- series variation across labor markets.

download in pdf format
   (360 K)

email paper

This paper is available as PDF (360 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4556

Published: Quarterly Journal of Economics, 110 (November 1995): 1075-1110

Users who downloaded this paper also downloaded these:
Borjas, Freeman, and Katz w3761 On the Labor Market Effects of Immigration and Trade
Borjas, Freeman, and Katz On the Labor Market Effects of Immigration and Trade
Krugman and Lawrence w4478 Trade, Jobs, and Wages
Feenstra and Hanson w5122 Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras
Morrison w3355 Market Power, Economic Profitability and Productivity Growth Measurement: An Integrated Structural Approach
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

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

Contact Us