Preliminary and Incomplete: Comments Welcome COMPETITION, TRADE AND WAGES*

I briefly review the empirical evidence in the trade and wages debate, which overwhelmingly rejects the Heckscher-Ohlin explanation for recent increases in OECD skill premia. I then argue that the same evidence is also difficult to reconcile in general equilibrium with the view that exogenous skill-biased technological progress is the culprit. Finally, I present a model of oligopolistic competition which is more consistent with the evidence. Removing quantitative constraints on imports (a metaphor for increased foreign competition) encourages both home and foreign firms to invest more aggressively, raising their demand for skilled labour even at unchanged relative wages