Trade and wages

Hartmut Egger and Udo Kreickemeier

Chapter 43 in Elgar Encyclopedia of International Trade, 2026, pp 221-224 from Edward Elgar Publishing

Abstract: In this entry, we give a brief overview of the academic literature examining the link between globalization and wages. Our presentation is unified by its focus on transmission mechanisms through which globalization-induced changes in the relative demand for different types of labor translate into wage effects specific to those different groups. Types of labor can be distinguished by their skill level (as emphasized in neoclassical trade analysis) or by their specific location of employment, which is the focus of modern firm-level analysis. We show that within this modern strand of the literature, rent sharing generates an empirically plausible link between firm-level exposure to international trade and changes in wages that are specific to the firm in which a worker is employed. Monopsony in the labor market is shown to be an alternative mechanism linking trade and firm-level wages with firm heterogeneity, whereby the form of globalization matters greatly for the results.

Keywords: International trade; Offshoring; Firm heterogeneity; Labor market imperfections; Wages; Income distribution (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035327492
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