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Trade and Labor usage: An examination of the Stolper-Samuelson theorem for the South African manufacturing industry

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Abstract

This paper advances on previous work on the effects of trade on labour markets as identified by the Stolper-Samuelson theorem in three respects. First, we employ dynamic heterogeneous panel estimation techniques, which allows to investigate both (possibly homogeneous) long-run relationship and (possibly heterogeneous) short-run dynamics simultaneously. Second, we consider evidence from a middle income country with abundant unskilled labor. Third, we investigate Stolper-Samuelson effects in both price and quantity dimension. We find that outputs prices increase most strongly in sectors that are labor intensive. In particular, trade has mandated positive earnings increases for both labor and capital, though increases are greater for labour, while technology has mandated negative earnings increases for both labor and capital. Given these results, growth of real wage rates are a plausible explanation of the high and sustained levels of unemployment in South African labor markets.

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  • Johannes Fedderke & Yongcheol Shin & Prabhat Vaze, 1999. "Trade and Labor usage: An examination of the Stolper-Samuelson theorem for the South African manufacturing industry," ESE Discussion Papers 33, Edinburgh School of Economics, University of Edinburgh.
  • Handle: RePEc:edn:esedps:33
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    Keywords

    trade liberalization; labor demand; total factor productivity; Stolper-Samuelson theorem; dynamic heterogeneous panel; mandated regression;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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