DP4406 Globalization, Roundaboutness and Relative Wages
|Author(s):||Joseph Francois, Kevin Blaine Grier, Douglas Nelson|
|Publication Date:||June 2004|
|Keyword(s):||division of labour, globalization, intra-industry trade, monopolistic competition, trade and wages|
|Programme Areas:||Labour Economics, International Trade and Regional Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4406|
We depart from the trade and wages literature and its emphasis on North-South trade, examining North-North trade and linkages between trade-based integration and relative wages in an Etiher-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.