International Trade and Labor Markets: Theory, Evidence, and Policy Implications

International Trade and Labor Markets: Theory, Evidence, and Policy Implications

International Trade and Labor Markets: Theory, Evidence, and Policy Implications

International Trade and Labor Markets: Theory, Evidence, and Policy Implications

Synopsis

Davidson and Matusz develop simple yet compelling models that allow for documented differences in labor markets across countries in order to investigate the impact of trade and trade policies on society's underclass.

Excerpt

It is well documented that during the last two decades, the economic fortunes of less-skilled workers in the United States and Europe have declined substantially. the stylized facts for this group include an erosion of real wages in the United States and sharply higher unemployment rates throughout Europe. Concurrently, both the United States and Europe have witnessed an explosion of trade, particularly with less-developed countries. These changes have sparked significant policy debate among both policy practitioners and within the economics profession concerning the impact of trade on labor-market outcomes, with particular concern being focused on the impact that globalization has had on low-wage workers with few marketable skills.

The vigorous debate surrounding these issues has produced two very different views of the world. For the vast majority of practitioners, the focal point of the debate is the perceived impact of globalization on employment. Those with a predisposition to oppose trade liberalization tend to buttress their positions with arguments that lower production costs and fewer regulations in other countries allow foreign firms to out-compete domestic producers, resulting in less domestic output and fewer domestic jobs. On the other hand, those who wish to see even greater liberalization often argue that freer trade expands our export markets, resulting in a greater demand for our products, greater domestic production, and more jobs.

This focus on trade and jobs is understandable. the media regularly reports on plant closings and mass layoffs. It is often suggested that stiff foreign competition may be one of the causes of such events. Sometimes the facts actually support such attributions. However, the media is not in the habit of reporting a success story each time a worker, displaced by globalization, finds a new job. It is all too easy to fall into the trap of viewing the worldwide number of jobs as fixed. If import penetration costs American jobs, then expanding exports must yield dividends in the form of increased employment for Americans.

In short, the picture that emerges is one of a world in which workers, particularly those near the bottom of the income distribution, cycle . . .

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.