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Globalization, Roundaboutness, and Relative Wages

Author

Listed:
  • Joseph Francois

    (Faculty of Economics, Erasmus Universiteit Rotterdam, and CEPR)

  • Kevin Grier

    (University of Oklahoma)

  • Douglas Nelson

    (Tulane University & Leverhulme Centre (Nottingham))

Abstract

We depart from the trade and wages literature and its emphasis on North-South trade, examining North-North by developing the basic linkages between trade-based integration and relative wages in an Ethier-type division of labor model. Using this model we identify a formal relationship between international trade, productivity, and wages. We then examine the trivariate relationship between trade, growth in total factor productivity (TFP), and the skill premium in a vector autoregression framework. We find evidence of a long-run relationship between growth in intermediate goods and changes in TFP. Controlling for this relationship we also find a positive relationship between trade and the skill-premium.

Suggested Citation

  • Joseph Francois & Kevin Grier & Douglas Nelson, 2004. "Globalization, Roundaboutness, and Relative Wages," Tinbergen Institute Discussion Papers 04-021/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20040021
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    References listed on IDEAS

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    Cited by:

    1. Joseph Francois & Julia Woerz, 2008. "Producer Services, Manufacturing Linkages, and Trade," Journal of Industry, Competition and Trade, Springer, vol. 8(3), pages 199-229, December.

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    More about this item

    Keywords

    trade and wages; globalization; division of labor; monopolistic competition; intra-industry trade;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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