Workers and trade liberalization: simulating the potential impact of the FTAA on Venezuela's output and wages

The Specific Factors model of production and trade with seven skilled labour categories and specific capital in three leading sectors of the Venezuelan economy is used to produce comparative static elasticities of changing prices on factor prices and output as a result of the emerging Free Trade Agreement of the Americas (FTAA). Results show that every labour group except production labour is projected to lose under free trade, while manufacturing capital gains at the expense of capital in agriculture and services due to a projected increase in export demand. Adjustments to free trade are large implying the importance of economic policy in the transition period to free trade.