European Trade with Lower-Income Countries and the Relative Wages of the Unskilled: An Exploratory Analysis for West Germany and the U.K.

Kiel Working Paper No. 819

40 Pages Posted: 16 Feb 1998

See all articles by Matthias Luecke

Matthias Luecke

The Kiel Institute for the World Economy; CASE - Center for Social and Economic Research

Date Written: June 1997

Abstract

This paper develops a Heckscher-Ohlin-type framework in which relative factor prices are affected by output prices as well as by total factor productivity growth. The empirical analysis finds no evidence that the relative prices of unskilled labor-intensive manufactures, adjusted for total factor productivity growth, declined after 1970 to depress the wages or employment opportunities (in the presence of an inflexible wage structure) of unskilled labor. Similarly, neither in West Germany nor in the U.K. did changes in the commodity composition of foreign trade reflect a sustained rise in the stock of unskilled labor in the rest of the world (which they should if labor markets were strongly affected by growing developing country exports).

JEL Classification: F14, J31

Suggested Citation

Lücke, Matthias, European Trade with Lower-Income Countries and the Relative Wages of the Unskilled: An Exploratory Analysis for West Germany and the U.K. (June 1997). Kiel Working Paper No. 819, Available at SSRN: https://ssrn.com/abstract=54052 or http://dx.doi.org/10.2139/ssrn.54052

Matthias Lücke (Contact Author)

The Kiel Institute for the World Economy ( email )

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