Globalization, Roundaboutness and Relative Wages

Francois, Joseph F.; Grier, Kevin B.; Nelson, Douglas

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Globalization, Roundaboutness and Relative Wages

41 Pages Posted: 17 Jun 2004

See all articles by Joseph F. Francois

Joseph F. Francois

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR); Vienna Institute of International Economic Studies (WIIW); University of Adelaide - School of Economics

Douglas Nelson

Tulane University - Department of Economics

There are 2 versions of this paper

Date Written: June 2004

Abstract

We depart from the trade and wages literature and its emphasis on North-South trade, examining North-North trade and linkages between trade-based integration and relative wages in an Etiher-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.

Keywords: Trade and wages, globalization, division of labour, monopolistic competition, intra-industry trade

JEL Classification: F12, F16

Suggested Citation: Suggested Citation

Francois, Joseph F and Grier, Kevin B. and Nelson, Douglas R., Globalization, Roundaboutness and Relative Wages (June 2004). Available at SSRN: https://ssrn.com/abstract=556734