Globalization, Roundaboutness, and Relative Wages

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

No 04-021/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We depart from the trade and wages literature and its emphasis on North-South trade, examining North-North by developing the basic linkages between trade-based integration and relative wages in an Ethier-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: trade and wages; globalization; division of labor; monopolistic competition; intra-industry trade (search for similar items in EconPapers)
JEL-codes: F16 F12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
Date: Written 2004-02-23
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Related works:
Working Paper: Globalization, Roundaboutness and Relative Wages (2004)
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