The Role of Trade

Robin Marris

Chapter 4 in How to Save the Underclass, 1996, pp 111-126 from Palgrave Macmillan

Abstract: Abstract There has been a ‘second phase’ of trade between developed countries and developing countries. In place of relying on primary products, the developing countries now export low-skill manufactures. But although this has benefited the average person, it has hurt unskilled workers in developed countries and contributed to the growth of ‘SAT.That is the proposition. What is the theory behind it? What is the evidence for it? The theory is based on a modern version of the classical economic theory of comparative advantage: if two countries specialize in products where they are least inefficient, it is possible for the citizens of both countries to be better off than if no trade had occurred. The key word is ‘possible Developing countries have a comparative advantage in unskilled-labourintensive goods because their populations, at the present time, contain large proportions of unskilled people. Therefore in these countries unskilled wages are comparatively low. Therefore exports of the corresponding products are competitive. But in exporting goods containing the results of comparatively low unskilled wages, the South also ‘exports’ her own wage structure. Unskilled wages in the North will come down and/or there will be more unskilled nonemployment. So although skilled workers in the North gain from both higher wages and cheaper imports, unskilled workers may gain nothing at all, or in fact may be absolutely worse off.

Keywords: Exchange Rate; Comparative Advantage; Skilled Labour; Unskilled Worker; Unskilled Labour (search for similar items in EconPapers)
Date: 1996
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37301-3_4

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230373013

DOI: 10.1057/9780230373013_4

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().