Cities and Inequality. Consider New York City in the 1980s, before the trade liberalization of the services sector. There are three types of workers: clerical workers, managers, and engineers. Clerical workers are fixed and specific to low tech services, managers can be in both sectors and are perfectly mobile, and engineers are fixed and specific to high-tech services. Assume that New York City has a comparative advantage in high tech services, while the rest of the world has a comparative advantage in low tech services.

When New York City experiences trade liberalization in the services sector, the price of high-tech services goes up, while the price of low-tech services remained flat. Show how the labor markets for managers change between autarky and free trade.