2. In many developed economies there has been an increase in wage inequality. In the last few decades, workers with a high level of skills have experienced larger increases in wages than workers who are less skilled.¹ a. One explanation for the rise in wage inequality focuses upon the role of international trade and the integration of some large developing economies into the global economy. Suppose that these large developing economies have a comparative advantage in products that require unskilled labour. Explain how this will affect the wage differential between skilled and unskilled workers. b. What other explanations do you think could plausibly explain why the wages of high skilled workers have increased by a large amount relative to unskilled workers?
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If these economies have a comparative advantage in products that require unskilled labor, they will likely increase their production and exports of these goods. This increased competition in the global market will put pressure on wages for unskilled workers in Show more…
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