Numerous studies [1] [2] [3] [4] have shown that automation and college\neducation may be a bigger contributor to wage-inequality than international\ntrade. Most of these models of trade focus on â??comparative-advantageâ? based\ntrade (i.e. trade in different products). Although much of world-trade is â??intra-\nindustryâ? (i.e. trade broadly in the same industry) in nature, relatively\nfewer studies have examined the relationship between wage-inequality and intra-\nindustry trade. This study examines the relationship between intra-industry\ntrade and wage-inequality, using a two-sector model of monopolistic competition.\nUnlike previous research, this study examines this relationship\nthrough a lens that has not been explored much in the previous literature:\ndifferences in consumer demand, which can arise from factors such as demographic\ndifferences (e.g. whether a population is young or aging) between\ntrade partners. My model suggests that: 1) intra-industry trade may be associated\nwith wage-inequality between two sectors in the same country, 2) the\nmagnitude of wage-inequality may depend on the differences in consumer demand\nin the countries that engage in international trade, and 3) wage-inequality\ncan arise between sectors even if all workers have similar skills to begin with.\nThese preliminary results may have some interesting implications for future\nresearch in the international trade literature.
Loading....