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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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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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Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 33.

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Length: 32
Date of creation: Dec 1999
Handle: RePEc:edn:esedps:33
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