Revisiting "The Fallacy of Free Trade."

Channing Arndt and Thomas Hertel

Review of International Economics, 1997, vol. 5, issue 2, 221-29

Abstract: The paper examines results presented by Batra in an article entitled "The Fallacy of Free Trade" (1992). Batra contends that technical change in Japanese manufacturing necessarily reduces US real wages in the confines of a two-good, two-country Ricardo-Viner model. A parsimonious empirical Ricardo-Viner model is constructed to analyze the same issue. It is found that the impact on US real wages is very small. Systematic sensitivity analysis shows that increases in the real wage are as likely as decreases. It is concluded that Batra's assertions are empirically unlikely. Copyright 1997 by Blackwell Publishing Ltd.

Date: 1997
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