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Trade, technology, and prosperity: An account of evidence from a labor-market perspective

Marc-Andreas Muendler ()

No ERSD-2017-15, WTO Staff Working Papers from World Trade Organization (WTO), Economic Research and Statistics Division

Abstract: Trade and technological change continually alter the workplace and labor-market outcomes, with consequences for economy-wide welfare and the distribution of real incomes. This report assesses the state of economic research into those areas, with a particular focus on empirical methodologies and their adequacy for an assessment of general-equilibrium outcomes. While difference-in-differences techniques and instrumental- variable approaches provide answers, they exhibit shortcomings that limit conclusiveness. Recent advances in structural estimation of multi-country and multisector models that allow for reallocation frictions in domestic labor markets hold promise to deliver more definite empirical answers. Interestingly, a conclusion from a two-decades old strand of literature seems to be vindicated by conclusions from a related recent literature: roughly one-quarter of changes in labor-market outcomes (wage inequality then and manufacturing job losses now) was predicted by trade integration and roughly one-third by technological change. The remainder of changes in labor-market outcomes remains unaccounted. The report offers candidate explanations, rooted in recent evidence, how interactions between globalization, technological progress, and structural change may account for that remainder.

Keywords: trade; current account balance; automation; choice of technology; industrial structure and structural change; labor-market outcomes; employment; jobs; wages; inequality (search for similar items in EconPapers)
JEL-codes: F16 F32 J23 J24 L16 O14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2017
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