Working Paper: CEPR ID: DP4406
Authors: Joseph Francois; Kevin Grier; Douglas Nelson
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: Division of Labour; Globalization; Intraindustry Trade; Monopolistic Competition; Trade and Wages
JEL Codes: F12; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade shocks (F14) | productivity (O49) |
| trade growth in intermediate goods (F10) | changes in TFP (O49) |
| trade (F19) | skill premium (J24) |
| productivity (O49) | wages (J31) |