International trade, technical change and wage inequality in the U.K. economy

"This paper examines the joint impact of international trade and technical change on U.K. wages across different skill groups. International trade is measured as changes in product prices and technical change as total factor productivity (TFP) growth. We take account of a multi-sector and multi...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Author Engelmann, Sabine
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2012
Subjects
International trade
Skilled workers
Wages & salaries
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Summary:"This paper examines the joint impact of international trade and technical change on U.K. wages across different skill groups. International trade is measured as changes in product prices and technical change as total factor productivity (TFP) growth. We take account of a multi-sector and multi-factor of production economy and use mandated wage methodology to offer a close theoretical-empirical relationship. We use data of the EU KLEMS database and analyse the impact of both, product price changes and TFP changes of 11 U.K. manufacturing sectors on factor rewards of high-, medium- and low-skilled workers. Results show that real wages of skill groups are driven by the sector bias of price change and TFP growth of selected sectors of production. Furthermore, for each year 1970-2005 we estimate the share of the three different skill groups on added value which indicate structural change in the U.K. economy. Empirical results show a structural change in the U.K. economy by the declined share of low-skilled workers and the increased share of medium-skilled and high-skilled workers over the years." (Author's abstract, IAB-Doku) ((en))