U.S. wages in general equilibrium
Subtitle: the effects of prices, technology, and factor supplies, 1963-1991
By: James Harrigan and Rita A. Balaban.
Contributors: Balaban, Rita A.; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 64; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 64.
Publisher: Federal Reserve Bank of New York
Published: 1999
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Wages -- Effect of technological innovations on -- United States -- Econometric models.; Wages -- Effect of international trade on -- United States -- Econometric models.; Income distribution -- United States -- Econometric models.; Factor proportions -- United States -- Econometric models.; Prices -- United States -- Econometric models.; Equilibrium (Economics) -- Econometric models.
Description: "Wage inequality in the United States has increased in the past two decades, and most researchers suspect that the main causes are changes in technology, international competition, and factor supplies.  The relative importance of these causes in explaining wage inequality is important for policy making and is controversial, partly because there has been no research which has directly estimated the joint impact of these different causes.  In this paper, we view wages as arising out of a competitive general equilibrium where goods prices, technology and factor supplies jointly determine outputs and factor prices.  We specify an empirical model which allows us to estimate the general equilibrium relationship between wages and technology, prices, and factor supplies.  The model is based on the neoclassical theory of production, and is implemented by assuming that GDP is a function of prices, technology levels, and supplies of capital and different types of labor.  We treat final goods prices as being partially determined in international markets, and we use data on trends in the international economy as instruments for U.S.  prices.  We find that relative factor supply and relative price changes are both important in explaining the growing return to skill.  In particular, we find that capital accumulation and the fall in the price of traded goods served to increase the return to education"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
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