The Impact of Trade on Wages: What If Countries are Not Small?

40 Pages Posted: 26 Jul 2006

See all articles by Mika Saito

Mika Saito

International Monetary Fund (IMF)

Ichiro Tokutsu

Konan University

Date Written: June 2006


This paper explores the effect of trade on the relative wage of less-skilled labor through its effect on world prices, which are typically exogenously given under the small open economy assumption. Using the 1995 international input-output data for APEC member countries, we numerically simulate a general equilibrium model to study the effects of abolishing existing tariffs under the assumption that each member country is large enough to affect the prices of goods and services produced in the region. We find that the responsiveness of prices plays an important role in easing a possible adverse effect of trade on relative wages.

Keywords: International Trade, Wages

JEL Classification: F11, F14, F16, C62

Suggested Citation

Saito, Mika and Tokutsu, Ichiro, The Impact of Trade on Wages: What If Countries are Not Small? (June 2006). IMF Working Paper, Vol. , pp. 1-40, 2006. Available at SSRN:

Mika Saito

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ichiro Tokutsu (Contact Author)

Konan University ( email )

8-9-1 Okamoto Higashinadaku
Kobe 658-8501

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