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Globalization, wage volatility and the welfare of workers

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  • Daniel Traca

Abstract

This paper analyzes the effects of trade liberalization on the level and volatility of factor returns, in a model with identical technologies across industries and industry-specific uncertainty. The results show an increase in the return to capital and, under certain conditions, a decline in the real wages and welfare of workers, along with an expansion of wage dispersion and volatility. Unlike the Solper–Samuelson mechanism, our results do not depend on the factor intensity of imports and exports and are borne out by all patterns of trade, including among industrialized countries, suggesting that the traditional analysis has missed some important linkages between trade and wages.

Suggested Citation

  • Daniel Traca, 2005. "Globalization, wage volatility and the welfare of workers," ULB Institutional Repository 2013/9227, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/9227
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    References listed on IDEAS

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    1. Marianne Bertrand, 2004. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 723-766, October.
    2. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    3. Daniel A. Traca, 2005. "Trade Exposure, Export Intensity, and Wage Volatility: Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 336-347, May.
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    Cited by:

    1. Karabay, Bilgehan & McLaren, John, 2010. "Trade, offshoring, and the invisible handshake," Journal of International Economics, Elsevier, vol. 82(1), pages 26-34, September.
    2. Damien Gaumont & Charbel Macdissi, 2012. "International Migration And Uncertainty:A Non-Factor Price Equalization Overlapping Generations Model," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(2), pages 151-177.
    3. Frédérique Bec, 2002. "Mondialisation, mobilité du capital et volatilité macro-économique," Economie & Prévision, La Documentation Française, vol. 0(1), pages 29-53.
    4. Svaleryd, Helena & Vlachos, Jonas, 2002. "Markets for risk and openness to trade: how are they related?," Journal of International Economics, Elsevier, vol. 57(2), pages 369-395, August.
    5. Svaleryd, Helena & Vlachos, Jonas, 2000. "Does Financial Development Lead to Trade Liberalization?," Research Papers in Economics 2000:11, Stockholm University, Department of Economics.

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