International competition and real wages
Abstract
Myriad politicians express concern over increased competition from abroad, but among economists the home economy is widely believed to benefit from improvement in foreign economies (Jeffrey Williamson, 1991). Work by a few economists (John R. Hicks, 1953; Ronald Jones, 1979; Paul Krugman, 1979) suggests that there is some truth to popular concerns over competitiveness. The effect of foreign competition in reducing the relative price of the goods that the United States formerly exported can lower aggregate real income in the United States even as world income rises. Accordingly, the success of Japan, Western Europe, and more recently many other nations in producing goods that were, as of the end of World War II, virtual monopolies of the United States is another potential candidate for explaining the fall (relative to trend) of the average living standard or real wage in the United States.
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