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.