Free trade and wage inequality in an advanced economy

This paper develops a formal model for examining the impact of free trade o n the wage inequality in the Northern economy and the sensitivity of wage i nequality indices to changes in causal factors within a general equilibrium setting. The model has three types of labor: sector-specific high-skilled, mobile un skilled and immobile unskilled labor. Thus, three types of wage inequality indices are derived. Selected comparative statics for changes in consumer e xpenditure shares, biased technological changes, changes in relative endowm ents are provided.