Supposing that a country has two factors of production, with skilled labor the abundant factor
and unskilled labor the scarce factor, the Heckscher-Ohlin theory states that, such country
should specialize in the production of, and export the skilled labor intensive commodity and
import the unskilled labor intensive commodity. So, the relative price of the former
commodity will rise. Accordingly, the Stopler-Samuelson relationship states that the relative
wage of the skilled labor will increase. On the other hand, the opposite holds for the unskilled
labor abundant country. Hence, there exists a positive relationship between wage inequality
and international trade. This work examines such relationship, empirically, in the United
States, as a developed country, and Egypt, as a developing country. Processing time series
data of the United States, the skilled labor abundant country, from 1981 till 2008 showed a
statistically significant positive relationship between the Gini coefficient of inequality and the
trade-GDP ratio. The relationship between relative wage of skilled labor and the trade-GDP
ratio was positive but insignificant. In Egypt, the unskilled labor abundant country, the
available data show that, both, the trade-GDP ratio and the relative employment of unskilled
labor increased. |
