Publication

This paper examines whether trade liberalization increases wage inequality over both the short and long term and finds that it does. To do this, it uses a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to study wage inequality during the adjustments after trade liberalization. The authors also argue that the effects on wage inequality are much more adverse when trade liberalization is unilateral instead of bilateral or restricted to specific sectors instead of including all sectors.