GEP Research Paper 02/29
Trade and Rising Wage Inequality in the UK: Results from a CGE Analysis
D. Greenaway, G.V. Reed and N. Winchester
Abstract
The phenomenon of rising wage inequality has been extensively documented in OECD countries. In the final quarter of the last century it appears to have been particularly marked in the US and UK. The drivers of rising inequality have been subject to econometric analysis and the relative roles of trade and skill-biased technical change evaluated. In this paper, we take an alternative approach, namely computable general equilibrium (CGE) modelling. The contribution of the paper is twofold: first, it constructs the first purpose built model of the UK economy specifically geared to evaluating the drivers of rising wage inequality; second, it incorporates new and more disaggregated measures of labour types. The model's output identifies clearly the role of trade in the process over the period 1980 to 1998.
Issued in December 2002.
This paper is available in PDF format .