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Keywords:

  • general equilibrium;
  • inequality;
  • technology;
  • trade
  • F16;
  • J31;
  • C68

ABSTRACT

This paper focuses on the decomposition of observed increases in UK wage inequality since 1979 into the component factors of competition from low-wage imports and technological change. Building on recent work by Abrego and Whalley, we argue that the length of production run and degree of fixity of factors is crucial in such analyses. If the response of labour markets to date is a short-run response, in which factors and output have not adjusted fully, then analysis of the causes of increased inequality is substantially altered relative to a long-run factors mobile world.