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Globalization, Roundaboutness and Relative Wages

  • Francois, Joseph
  • Grier, Kevin Blaine
  • Nelson, Douglas

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4406.

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Date of creation: Jun 2004
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Handle: RePEc:cpr:ceprdp:4406
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  1. Robert C. Feenstra & Gene M. Grossman & Douglas A. Irwin (ed.), 1996. "The Political Economy of Trade Policy: Papers in Honor of Jagdish Bhagwati," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061864, June.
  2. Atesoglu, H Sonmez & Vilasuso, Jon, 1999. "A Band Spectral Analysis of Exports and Economic Growth in the United States," Review of International Economics, Wiley Blackwell, vol. 7(1), pages 140-52, February.
  3. Yamada, Hiroshi, 1998. "A note on the causality between export and productivity:: an empirical re-examination," Economics Letters, Elsevier, vol. 61(1), pages 111-114, October.
  4. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  5. Gaston, Noel & Trefler, Daniel, 1995. "Union wage sensitivity to trade and protection: Theory and evidence," Journal of International Economics, Elsevier, vol. 39(1-2), pages 1-25, August.
  6. Gene M. Grossman, 1984. "International Competition and the Unionized Sector," Canadian Journal of Economics, Canadian Economics Association, vol. 17(3), pages 541-56, August.
  7. Marin, Dalia, 1992. "Is the Export-Led.Growth Hypothesis Valid for Industrialized Countries?," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 678-88, November.
  8. Kunst, Robert M & Marin, Dalia, 1989. "On Exports and Productivity: A Causal Analysis," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 699-703, November.
  9. James R. Markusen, 1990. "Micro-foundations of External Economies," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 495-508, August.
  10. Werner Antweiler & Daniel Trefler, 2000. "Increasing Returns and All That: A View From Trade," NBER Working Papers 7941, National Bureau of Economic Research, Inc.
  11. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
  12. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August.
  13. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  14. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  15. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  16. Colin Lawrence & Robert Z. Lawrence, 1985. "Manufacturing Wage Dispersion: An End Game Interpretation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 47-116.
  17. Francois, Joseph F, 1994. "Global Production and Trade: Factor Migration and Commercial Policy with International Scale Economies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 565-81, August.
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