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Who Gains from Trade Reform? Some Remaining Puzzles

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Listed author(s):
  • Ann Harrison
  • Gordon Hanson

Abstract

This paper focuses on three unresolved issues with regard to the impact of trade reform. First, many studies linking trade reform to long run growth are surprisingly fragile. To illustrate the problems with this literature, we examine a popular measure of openness recently introduced by Sachs and Warner (1995). We show that their measure fails to establish a robust link between more open trade policies and long run growth. The second puzzle we identify is the small impact of trade reform on employment in developing countries. Finally, we analyze evidence on the relationship between trade reform and rising wage inequality, focusing on the 1985 Mexican trade reform. Wage inequality in Mexico rose after the reform, which is puzzling in a Heckscher-Ohlin context if Mexico has a comparative advantage in producing low skill-intensive goods.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6915.

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Date of creation: Jan 1999
Publication status: published as Journal of Development Economics, Vol. 51 (1999): 315-324.
Handle: RePEc:nbr:nberwo:6915
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Find related papers by JEL classification:
  • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
  • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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  2. Pack, Howard, 1988. "Industrialization and trade," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 9, pages 333-380 Elsevier.
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  7. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 102-135, July.
  8. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
  9. 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.
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  17. Gene M. Grossman, 1982. "The Employment and Wage Effects of Import Competition in the United States," NBER Working Papers 1041, National Bureau of Economic Research, Inc.
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  19. Bhagwati, Jagdish N, 1988. "Export-Promoting Trade Strategy: Issues and Evidence," World Bank Research Observer, World Bank Group, vol. 3(1), pages 27-57, January.
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  22. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, October.
  23. Jagdish N. Bhagwati, 1978. "Anatomy and Consequences of Exchange Control Regimes," NBER Books, National Bureau of Economic Research, Inc, number bhag78-1, October.
  24. Anne O. Krueger, 1983. "Trade and Employment in Less Developed Countries: The Questions," NBER Chapters,in: Trade and Employment in Developing Countries, Volume 3: Synthesis and Conclusions, pages 1-9 National Bureau of Economic Research, Inc.
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