Trade and Rising Wage Inequality: What can we learn from a Decade of Computable General Equilibrium Analysis?

This paper surveys computable general equilibrium (CGE) contributions to trade-wage debate. We conclude that this literature provides an avalanche of support for the view that trade has had only a minor influence on wage inequality through Heckscher-Ohlin channels. Moreover, some studies show that trade may be associated with declining wage inequality and/or reveal that North-North trade is responsible for a greater proportion of the increase in Northern wage inequality than North-South trade. The impact of trade-induced technical change, however, has received little attention in the CGE literature.