Globalization, roundaboutness, and relative wages

Joseph Francois; Kevin Grier; Douglas Nelson

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.

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Year of publication:	2004
Authors:	Francois, Joseph F. ; Grier, Kevin ; Nelson, Douglas R.
Publisher:	Rotterdam [u.a.] : Tinbergen Inst.
Subject:	trade and wages \| globalization \| division of labor \| monopolistic competition \| intra-industry trade \| Monopolistischer Wettbewerb \| Monopolistic competition \| Intraindustrieller Handel \| Intra-industry trade \| Internationale Arbeitsteilung \| International division of labour \| Theorie \| Theory \| Globalisierung \| Globalization \| Lohn \| Wages \| Internationale Wirtschaft \| International economy \| Produktivität \| Productivity