Decomposing the growth of the high-skilled wage premium in an advanced economy open to trade

We use a double-calibrated general equilibrium model to decompose the growth of high-skilled wage premium in UK from 1979 2000 into range potential contributory factors. This structural approach ensures that used is consistent with both price and quantity data simultaneously, allows us investigate wide plausible parameter values. find small observed rise skill net outcome set opposing effects, some which are large. In particular, negative effect on rising supply skilled labour mostly offset by factor bias technical change favour labour. To this extent our work supports previous labour-market based studies, but novel showing these trade volume changes framework. If we assume production technology dominated capital-skill complementarity, fall capital prices (positive premium) sector unskilled-labour-intensive sectors (negative effect) also become quantitatively important. The impact international consumer preferences positive, while not large compared role bias, it still significant as proportion premium. conclude such ours provides robust insights processes drive At same time, treat exogenous, future research might usefully aim endogenize acquisition decisions market policies more fully dynamic modelling technique.