Globalization, Roundaboutness and Relative Wages

Joseph Francois (), Kevin Grier () and Douglas Nelson ()

No 4406, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We depart from the trade and wages literature and its emphasis on North-South trade, examining North-North trade and linkages between trade-based integration and relative wages in an Etiher-type division of labor model. Using this model we identify a formal relationship between international trade, productivity, and wages. We then examine the trivariate relationship between trade, growth in total factor productivity (TFP), and the skill premium in a vector autoregression framework. We find evidence of a long-run relationship between growth in intermediate goods and changes in TFP. Controlling for this relationship we also find a positive relationship between trade and the skill-premium.

Keywords: division of labour; globalization; intra-industry trade; monopolistic competition; trade and wages (search for similar items in EconPapers)
JEL-codes: F12 F16 (search for similar items in EconPapers)
Date: Written 2004-06
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