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The Impact of Tradeon Wages; What If Countries Are Not Small?

  • Ichiro Tokutsu
  • Mika Saito

This paper explores the effect of trade on the relative wage of less-skilled labor through its effect on world prices, which are typically exogenously given under the small open economy assumption. Using the 1995 international input-output data for APEC member countries, we numerically simulate a general equilibrium model to study the effects of abolishing existing tariffs under the assumption that each member country is large enough to affect the prices of goods and services produced in the region. We find that the responsiveness of prices plays an important role in easing a possible adverse effect of trade on relative wages.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/155.

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Length: 40
Date of creation: 01 Jun 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/155
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  1. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
  2. Andrew Feltenstein & Florenz Plassmann, 2008. "The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers," The World Economy, Wiley Blackwell, vol. 31(7), pages 905-924, 07.
  3. Richard B. Freeman & Remco Oostendorp, 2000. "Wages Around the World: Pay Across Occupations and Countries," NBER Working Papers 8058, National Bureau of Economic Research, Inc.
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