This paper analyzes trade in an asymmetric 2×2×2 world, where the two countries, labelled America and Europe, differ in their attitudes towards wage inequality. In both America and Europe, fair wage considerations compress differentials between the wages for skilled and unskilled workers,...

This paper analyzes trade in an asymmetric 2×2×2 world, where the two countries, labelled America and Europe, differ in their attitudes towards wage inequality. In both America and Europe, fair wage considerations compress differentials between the wages for skilled and unskilled workers,...

This paper sets up a general equilibrium model, in which firms are heterogeneous due to productivity differences and workers have fairness preferences and hence provide full effort only if their factor return is sufficiently high. With the wage considered to be fair by workers depending on the...