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

Kevin B. Grier

Texas Tech University

Douglas Nelson

Tulane University - Department of Economics

Multiple version iconThere 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

Francois, Joseph F and Grier, Kevin B. and Nelson, Douglas R., Globalization, Roundaboutness and Relative Wages (June 2004). CEPR Discussion Paper No. 4406. Available at SSRN: https://ssrn.com/abstract=556734

Joseph F Francois (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vienna Institute of International Economic Studies (WIIW) ( email )

Oppolzergasse 6
A-1010 Vienna
Austria

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 5540 (Phone)
+61 8 8223 1460 (Fax)

Kevin B. Grier

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Douglas R. Nelson

Tulane University - Department of Economics ( email )

New Orleans, LA 70118
United States

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