Working Paper: CEPR ID: DP1069
Authors: Joseph F. Francois
Abstract: This paper examines the implications of labour force growth in one region for wages, employment, and production patterns in other regions. These issues are first explored in a stylized dual model incorporating features of both standard factor-based trade models and models of two-way trade and returns to specialization. Sufficient conditions for positive trade linkages between labour force growth in one region and real wage and employment erosion in another are derived. These conditions are then examined in the context of non-OECD labour force growth, through a multi-region, multi-sector numerical model of the world economy.
Keywords: trade; demographics; employment; modelling
JEL Codes: F13; J11; J21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labour force growth in one region (J21) | wage erosion in another region (J31) |
| labour force growth in one region (J21) | employment pressures in another region (R23) |
| labour force growth (J21) | price changes in sectors that are labour abundant (F16) |
| price changes in sectors that are labour abundant (F16) | global price declines (E30) |
| global price declines (E30) | contraction in labour-intensive production in the OECD (J89) |
| contraction in labour-intensive production in the OECD (J89) | falling real wages (E25) |