"Decomposing Wage Inequality Change into Trade and Technology Components Using General Equilibrium Models"

Economists have long been interested in decomposing observed economic outcomes drive by multiple factors into parts attributable to each. This is the case in both the growth accounting literature (Solow, 1957), and the economic history literature (Fogel, (1964), for instance). The majority of these exercises focus on identifying the separate role played by a few key factors presumed to be the main sources behind the outcome, typically leaving a residual as attributed to factors not explicitly modelled. How to decompose observed economic outcomes has been little studied in the applied general equilibrium literature (see Shoven and Whalley, 1992). Models have, instead, largely been used for ex-ante counterfactual exercises of anticipated policy changes, whose outcome has not been observed.