Impact of international trade under dual labor markets

A country's unemployment rate can be affected by technology choice and the opening of international trade. This general equilibrium model examines the impact of international trade with the presence of dual labor markets in which manufacturing firms engage in oligopolistic competition and choose technologies with different marginal and fixed costs to maximize profits. In a closed economy, it is shown that an increase in labor market efficiency or a population increase induces manufacturing firms to adopt more advanced technologies and the wage rate in the manufacturing sector increases. With the existence of a continuum of technologies, technology choice is not a source of firm heterogeneity. The opening of international trade leads to an increase in the wage rate in the manufacturing sector and the price of the agricultural good. When countries are identical, international trade always increases national welfare.     

International Trade,Technology, and the Wage Gap: Evidence from Granger‐causality Tests*

In this paper, we propose an alternative approach under which to examine the source of the increased wage gap between skilled and unskilled workers in US manufacturing. Rather than imposing the assumptions inherent in a given structural form, we posit a long‐run equilibrium relationship between international trade, technology, and the wage premium using a vector error‐correction model. We first test for the existence of a long‐run relationship using cointegration tests. If a cointegrating relationship is found, we then conduct tests on the direction of the long‐run relationship and of Granger causality. We apply our approach to each two‐digit and four‐digit SIC industry and find evidence in support of international trade being an important source of the wage gap. Our results suggest that it is premature to dismiss international trade as a possible suspect behind the rising wage premium.     

Wage share,globalization and crisis: the case of the manufacturing industry in Korea,Mexico and Turkey

The aim of this paper is to analyze the changes in the wage share in the manufacturing industry in Mexico, Turkey and Korea in the era of globalization. The focus is on the one hand on the effects of globalization on the wage share, which is measured by the effects of international trade and FDI intensity of the economy. On the other hand, the process of opening up has been accompanied by major currency crises in most developing countries in the last decade, which has affected the wage share through exchange rate depreciation and economic recession. The paper develops a Post‐Keynesian conflicting claims model for an open economy under the pressure of globalization, and an equation for the wage share is estimated for each country using the Seemingly Unrelated Regression method. The results show that both recessions and nominal depreciations have a clear and lasting negative effect on the manufacturing wage share in all countries, whereas the effect of openness, in particular international trade depends on industrial policy structure. Increased export intensity leads to a decline in the manufacturing wage share in Turkey and Mexico, but has no significant effect in Korea. The positive expectations from FDI are also not materialized in any of the three countries.     

Hit by the Silk Road: how wage coordination in Europe mitigates the China shock*

Coordination in collective wage setting can constrain potential monopoly gains to unions in non-tradable industries. Countries with national wage coordination can thus stabilize overall employment against fluctuations and shocks in the world economy. We investigate this argument by exploring within-country variation in exposure to competition from China in 13 European countries. Our estimates demonstrate that in countries with uncoordinated wage setting, regions with higher import exposure experienced a marked fall in employment, while countries with wage coordination experienced no such employment effects. We show that our findings are robust to alternative measures of wage coordination, industry classifications, and trade exposure.     

Wage posting: evidence from job ads

Abstract Recent studies of search theory examine how employers use a wage‐setting mechanism – either by bargaining or through the posting of a non‐negotiable wage offer in a job ad – to facilitate search. We contribute to this literature by examining wage posting in job ads in the US, the UK, and Slovenia. Despite considerable differences in the incidence of wage posting, employers in all three markets are less likely to post a wage offer when searching for skilled workers. The decision on whether or not to post a wage offer is only weakly related to the outcomes of employers’ search.     

Two Tales on the Returns to Education: The Impact of Trade on Wages

This paper uses micro data from the Current Population Survey combined with data from the US International Trade Commission and Bureau of Economic Analysis to evaluate the impacts of international trade (import penetration and export intensiveness) on wages with a special focus on the returns to education. Consistent with the literature, our empirical analysis provides evidence that the wage rates of similarly skilled workers differ across net‐exporting, net‐importing, and nontradable industries. Our results add to the literature by showing that the wage gap usually found across importing and exporting industries vanishes for highly skilled workers (workers with college degree and beyond) when we control for the cross‐effect between international trade and education, but the wage gap due to international trade still persists for low‐skilled workers. This finding supports the view that education serves as an equalizer and counterbalances the adverse impact from import penetration on wages of highly skilled workers.     

中国制造业贸易模式变迁的工资差距效应

本文利用中国制造业27个细分行业的面板数据,采用固定效应不变系数的静态面板模型,考察了我国制造业从产业间贸易向产业内贸易的变迁对行业间工资差距的影响及其传导机制。研究结果表明：（1）在制造业贸易模式的变迁中,出口扩大了行业间工资差距,而进口缩小了行业间工资差距。（2）制造业贸易模式变迁主要通过价格机制扩大了行业间的工资差距,而技术机制和个体机制的影响则不显著。     

A Union-bashing Model of Inflation Targeting

This paper shows that in an open two‐sector economy, centralization of wage setting may be important in determining the employment (and welfare) effects of different monetary targets. By disciplining unions in the sectors open to international trade, exchange rate targeting yields higher employment than inflation targeting when wage‐setting is more centralized in the open sector than in the shielded sector. When wage‐setting centralization is higher in the shielded sector, we show that general price‐level inflation targeting, while better than exchange rate targeting, is inferior to an inflation target that focuses more heavily on shielded sector prices.     

International Trade and Inter‐Industry Wage Structure in Swedish Manufacturing: Evidence from Matched Employer–Employee Data*

This study examines the inter‐industry wage structure in Swedish manufacturing, using matched employer–employee data for the period 1996 to 2000. First, we used detailed individual and job characteristics to estimate industry‐specific and time‐varying wage premiums. Secondly, we investigated the impact of international trade on wage premiums, controlling for effects of domestic competition and technical progress. Our results suggest that industries that face intensive import competition from low‐income countries have lower wage premiums. Surprisingly, the wage premiums are not related to export intensities. Furthermore, technical progress, measured by investment in R&D activity, appears to enhance inter‐industry wage premiums.     

Redistributing Gains from Globalisation*

This paper analyses the effects of redistribution in a model of international trade with heterogeneous firms in which a fair‐wage effort mechanism leads to firm‐specific wage payments and involuntary unemployment. The redistribution scheme is financed by profit taxes and gives the same absolute lump‐sum transfer to all workers. International trade increases aggregate income and income inequality, ceteris paribus. If, however, trade is accompanied by a suitably chosen increase in the profit tax rate, it is possible to achieve higher aggregate income and a more equal income distribution than in autarky, provided that the share of exporters is sufficiently high.     

International Trade and Gender Wage Discrimination: Evidence from East Asia

The paper explores how competition from international trade affects gender wage discrimination in two open economies. According to neoclassical theory, if discrimination is costly, then increased industry competitiveness from international trade lessens the incentive for employers to discriminate against women. This effect should be stronger in concentrated sectors, where employers can use excess profits to cover the costs of discrimination. Alternatively, increased international trade may reduce women's bargaining power to achieve wage gains. Results for Taiwan and Korea indicate that, in contrast to neoclassical theory, competition from foreign trade in concentrated industries is positively associated with wage discrimination against women.     

The heterogeneous effect of finance on international trade

Is the impact of financial development on international trade heterogeneous – being positive, negative or null – across manufacturing sectors? And is it dependent on the level of sectoral requirement on external finance for capital need? To examine these questions this article uses a panel trade database on 21 manufacturing sectors in 80 countries between 2000 and 2009. The analysis demonstrates that the effect of financial development on trade is indeed heterogeneous by estimating a coefficient for each sector and showing that the signs and significance levels vary across them. The article also demonstrates that sectors with strong reliance on external finance export higher volume from countries with developed financial system and that financial development reduces trade in industries with low financial dependence level.     

Two Dimensions of Convergence: National and International Wage Adjustment Effects of Cross-border Outsourcing in Europe

The paper proposes a distinction between the two dimensions of convergence—within and between countries—when analyzing the impact of cross‐border outsourcing on real wage rates in the EU‐15 and the CEEC. In the CEEC, international outsourcing has not affected the adjustment of average real wage rates at the manufacturing industry level, but it has led to a closure of the gap within a typical EU economy. Between‐country convergence is likewise fostered by cross‐border outsourcing, supporting the hypothesis that outsourcing facilitates international factor price equalization.     

Wage inequality in developing countries: South–South trade matters

The relationship between trade liberalization and inequality has received considerable attention in recent years. The major purpose of this study is to present new results on the sources of wage inequalities in manufacturing taking into account South–South (S–S) trade. Globalization has not only lead to increasing North–South (N–S) trade, but it has also changed the direction and composition of trade as more trade is carried out among developing countries. In this study, we find that increasing wage inequality is associated more with the South–South trade liberalization than with the classical trade liberalization with northern countries. A part of this increasing wage inequality due to S–S trade comes from the development of N–S trade relationship in S–S trade that increases wage inequality in middle-income developing countries. This study also seeks to shed some light on the link between the direction of trade and technological change. We explore the fact that S–S trade leads to a technological change biased toward skill-intensive sectors more than N–S trade. This indirect effect increases wage inequality for all developing countries, but it is more important in low-income countries.     

Foreign Trade of Manufactures and Men and Women’s Employment and Earnings in Germany and Japan

Using factor content analysis, this paper provides estimates of the effects of manufacturing trade expansion on men and women's employment in Germany and Japan, with breakdowns by world, OECD, and non-OECD trade. Evidence is found that foreign trade expansion had a more negative effect on women's than men's manufacturing employment in Japan and a roughly equal effect in Germany, with the difference between the countries driven by non-OECD trade. In spite of this, demand shifted away from women's manufacturing employment in Germany after the early-1970s, for both the manufacturing sector as a whole and for manufacturing industries with high female shares of employment, while no such labor demand shifts occurred in Japan. In the face of these differences in labor demand and of very similar increases in female labor supply, male-female hourly wage differences narrowed in Germany and widened in Japan, for both manufacturing and non-agricultural employees. It is concluded that shifts in neither labor supply nor labor demand fit with observed trends of male-female wage differences in Germany and Japan.     

Skill premium in Portuguese manufacturing industries

The debate between the skill-biased technological change (SBTC) approach and the international trade (IT) explanation to obtain the best explanation for the wage gap between skilled and unskilled workers continues. In this article, we divide the Portuguese manufacturing industries into high-tech and low-tech and study the approach that best justifies the wage gap, for the period between 2007 and 2014. The results point out that the SBTC approach is the main explanation to the formation the wage gap between the labour force with tertiary education (skilled) and with secondary and primary education (unskilled).     

On the evolution of the spatial economy with multi-unit · multi-plant firms: the impact of IT development

This paper examines how the decline of communication costs between management and production facilities within firms and the decrease in trade costs of manufactured goods affect the spatial organization of a two-region economy with multi-unit·multi-plant firms. The development of information technology decreases the costs of communication and trade costs. Thus, the fragmentation of firms is promoted. Our result indicates that, with decreasing communication costs, firms producing low trade-cost goods (such as electronics products) tend to concentrate their manufacturing plants in low wage countries. In contrast, firms producing high trade-cost products (such as automobiles) tend to have multiple plants serving to segmented markets, even in the absence of wage differentials.Received: November 2004, Accepted: March 2005, JEL Classification: F12, L13, R13Masahisa Fujita: Correspondence toWe are very grateful to J. Vernon Henderson, J. Pedro Pontes and Koumei Sasaki for helpful comments.     

Trade liberalisation,market competition and wage inequality in China's manufacturing sector

Economic reforms of the late 1980s have contributed to rapid economic growth in China. While the overall standard of living has improved, economic growth has also resulted in an increase in income inequality. Rising income inequality can increase social tensions that can impede further economic growth. By making use of firm level panel data, this paper focuses on the impact of increased market competition and trade liberalisation on skilled–unskilled wage inequality in China's manufacturing sector. A theoretical model is used to argue that trade liberalisation and market competition can affect skilled–unskilled wage inequality. Based on this result, an econometric model is specified. The empirical analysis presented in this paper shows that increased trade liberalisation has contributed to an increase in skilled–unskilled wage inequality in China's manufacturing sector. However, increase in market competition has the opposite effect.     

International outsourcing when labour markets are unionized

Abstract. We consider the implications of international outsourcing in a simple general equilibrium model where the wage rate is the outcome of negotiations between a firm and a trade union. The effects of potential, but non‐realized, international outsourcing, is a reduction in the wage rate and an increase in employment. Aggregate welfare increases, but the trade union becomes worse off while owners of capital become better off. Realized international outsourcing gives rise to an increase in the wage rate and a reduction in employment. Aggregate welfare decreases, but the trade union becomes better off, while owners of capital become worse off.     

全球制造业工资停滞之谜*——来自进口中间产品质量视角的经验证据

本文从快速增长的中间产品贸易及其质量视角研究了全球制造业工资停滞现象。首先，基于DS垄断竞争框架和Koch & Smolka(2019)的研究，本文重新构建开放条件下的工资决定模型，发现进口中间产品质量影响各国劳动工资。其次，借鉴Feenstra & Romalis(2014)的研究，本文构建全新的测度产品—行业—国家层面进口中间产品质量GEKS 指数法，估算1995—2011年37个国家从248个出口市场进口的制造业四位码中间产品质量指数，发现全球制造业进口中间产品质量上升趋势明显但分化严重，中等和低等收入国家质量指数持续上升，高等收入国家质量指数持续下降。最后，本文从跨国—行业层面定量识别进口中间产品质量对进口国制造业工资的具体影响，发现：(1)进口中间产品质量对全球制造业的劳动工资有显著负向影响，对中等收入国家、中级技术密集型行业、高技能劳动者以及进口矿物类中间产品制造业的工资降低效应最大；(2)进口中间产品质量通过“就业破坏效应”和“研发激励效应”两种机制造成全球制造业工资下降；(3)进口中间产品质量变化造成制造业工资下降是全球化中的市场性经济规律和暂时性“全球冲击波”。上述发现解释了全球制造业工资停滞之谜，并启示各国须尊重全球化的市场规律，加强国际合作，共同应对冲击，提高民众福祉，携手共建人类命运共同体。