Trade and Employment: Stylized Facts and Research Findings

37 Pages Posted: 19 Aug 2005

See all articles by Bernard Hoekman

Bernard Hoekman

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Robert Schuman Centre for Advanced Studies; Centre for Economic Policy Research (CEPR)

L. Alan Winters

University of Sussex; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: August 2005

Abstract

The substantial literature investigating the links between trade, trade policy, and labor market outcomes - both returns to labor and employment - has generated a number of stylized facts, but many open questions remain. This paper surveys the subset of the literature focusing on trade policy and integration into the world economy. Although in the longer run trade opportunities can have a major impact in creating more productive and higher paying jobs, this literature tends to take employment as given. A common finding is that much of the shorter run impacts of trade and reforms involve reallocation of labor or wage impacts within sectors. This reflects a pattern of expansion of more productive firms - especially export-oriented or suppliers to exporters - and contraction/adjustment of less productive enterprises in sectors that become subject to greater import competition. Wage responses to trade and trade reforms are generally greater than employment impacts, but trade can only explain a small fraction of the general increase in wage inequality observed in both developed and developing countries in recent decades. A feature of the literature survey is that the focus is almost exclusively on industries producing goods. Given the importance of service industries as a source of employment and determinants of competitiveness, we argue that one priority area for future research is to study the employment effects of services trade and investment reforms.

Suggested Citation

Hoekman, Bernard and Hoekman, Bernard and Winters, L. Alan Alan, Trade and Employment: Stylized Facts and Research Findings (August 2005). World Bank Policy Research Working Paper No. 3676, Available at SSRN: https://ssrn.com/abstract=780467 or http://dx.doi.org/10.2139/ssrn.780467

Bernard Hoekman (Contact Author)

Robert Schuman Centre for Advanced Studies ( email )

Fiesole, Tuscany
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

L. Alan Alan Winters

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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