Discussion Paper Details

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Title: Victims of Progress: Economic Integration, Specialization and Wages for Unskilled Labour

Author(s): Joseph Francois and Doug R Nelson

Publication Date: August 2000

Keyword(s): FDI And Wages, Globalization And Employment, Trade And Employment and Trade And Wages

Programme Area(s): International Trade and Regional Economics

Abstract: In this paper we demonstrate that intra-industry trade (or FDI) between identical countries could produce the observed deterioration in the relative wages of unskilled workers. This involves a model of North-North integration through either increased trade flows or increased MNE-based production. Our motivation in this regard is a series of arguments to the effect that trade cannot be responsible for the observed labour market trends because trade with developing countries is quantitatively too small to have significant labour market effects. We also introduce a relatively unexploited class of model that possesses attractive properties with respect to the explicit incorporation of firm-theoretic considerations in trade models.

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Bibliographic Reference

Francois, J and Nelson, D. 2000. 'Victims of Progress: Economic Integration, Specialization and Wages for Unskilled Labour'. London, Centre for Economic Policy Research.