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


  • Eugene Beaulieu
  • Vivek Dehejia
  • Hazrat-Omar Zakhilwal


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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  • Eugene Beaulieu & Vivek Dehejia & Hazrat-Omar Zakhilwal, 2004. "International Trade, Labour Turnover, and the Wage Premium: Testing the Bhagwati-Dehejia Hypothesis for Canada," CESifo Working Paper Series 1149, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1149

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    Cited by:

    1. 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.
    2. Javed Iqbal & Misbah Nosheen & Syed Nawab Haider Naqvi, 2015. "Trade Shocks and Labour Adjustment: Evidence from Pakistan’s Manufacturing Industries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(3), pages 197-214.
    3. Schuster, Philip, 2012. "Employment Protection, Labor Market Turnover, and the Effects of Globalization," Economics Series 288, Institute for Advanced Studies.
    4. Natalia Melgar & Juliette Milgram & Máximo Rossi, 2009. "The role of macroeconomic performance in individual’s attitudes towards protectionism," Documentos de Trabajo (working papers) 0809, Department of Economics - dECON.

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