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Victims of Progress: Economic Integration, Specialization, and Wages for Unskilled Labor

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  • Joseph Francois

    () (Erasmus University Rotterdam, and CEPR)

  • Douglas R. Nelson

    (Murphy Institute of Political Economy)

Abstract

In this paper we demonstrate that intra-industry trade (or FDI)between identical countries could produce theobserved deterioration in the relative wages of unskilled workers.This involves a model of North-Northintegration through either increased trade flows or increased MNE-based production. Our motivation in this regardis arguments to the effect that trade cannot be responsible for theobserved labour market trends because tradewith developing countries is quantitatively too small to havesignificant labour market effects. We also introduce arelatively unexploited class of model that possesses attractiveproperties with respect to the explicit incorporationof firm-theoretic considerations in trade models.

Suggested Citation

  • Joseph Francois & Douglas R. Nelson, 2000. "Victims of Progress: Economic Integration, Specialization, and Wages for Unskilled Labor," Tinbergen Institute Discussion Papers 00-065/2, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20000065
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    References listed on IDEAS

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    More about this item

    Keywords

    trade and wages; trade and employment; FDI and wages; globalization and employment;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F15 - International Economics - - Trade - - - Economic Integration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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