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International Trade, Labour Turnover, and the Wage Premium: Testing the Bhagwati-Dehejia Hypothesis for Canada

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Author Info
Eugene Beaulieu ()
Vivek Dehejia ()
Hazrat-Omar Zakhilwal ()

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Abstract

In this paper we examine the impact of international trade on the absolute and relative wages of educated and less-educated workers in Canada over 1993-96. We show that after correcting for the relative supply effect of educated to less educated workers the wage differential would have been on an upward trend. Moreover, after controlling for other relevant factors influencing real wages, trade had a statistically significantly positive impact on the wages of both educated and less educated workers. However, the impact on the educated workers was four times stronger, roughly the same as the impact of technology on relative wages. We show that the observed relationship between trade and the relative wage of educated to less-educated workers does not fit the Stolper-Samuelson theoretical explanation. The observed results are more in line with the Bhagwati-Dehejia hypothesis, which posits a link from trade to wages through volatility, labour turnover, and jobless spells.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1149.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1149

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Find related papers by JEL classification:
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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References listed on IDEAS
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. James Dean & Vivek H. Dehejia & Elinor Johansen & Sarah Turney, 2004. "Optimal Globalization and National Welfare," Carleton Economic Papers 04-17, Carleton University, Department of Economics. [Downloadable!]
  2. Sohrab Abizadeh & Manish Pandey & Mehmet Serkan Tosun, 2007. "Impact of Trade on Productivity of Skilled and Unskilled Intensive Industries: A Cross-Country Investigation," Working Papers 07-007, University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics. [Downloadable!]
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