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Most western economists have denied the linkage between the rise in the skill premium in the North and North-South trade. Their main argument is that the volume of Southern exports is too small (about 2% of Northern GDP) to produce large labor-market effects. By exploring the nature of...

As a standard explanation for national price levels, the Balassa-Samuelson (BS) model presupposes a homogeneous domestic labor force and intersectoral labor mobility. We propose a contrasting theory of the “rich neighborhood effect” (RNE). It is a more general theory because it explicitly...

This paper conducts a methodological assessment of the skill premium literature within the HO framework, with several quot;revolutionaryquot; conclusions: 1) factor content analysis is the most legitimate and direct way to estimate trade effects in the spirit of the HO model; 2) the popular...

This paper develops a general equilibrium model that shows a small volume of North-South trade (i.e. 2% of Northern GDP) can cause the observed rise in skill premium, thus resolving the ldquo;small trade volume paradoxrdquo; in the skill premium debate. We do this by applying the concept of...

We develop a general theory of regional (inter-city) price dispersion which also explains the ldquo;subnational Penn effectrdquo;, i.e. cross-city correlations among population size, prices, real income and human capital stock. As a version of the neoclassical urban systems theory (Henderson,...