Trade and Wages: A Malign Relationship?
THE DECLINE in real wages of unskilled workers in the United States during the 1980s, and the increase instead in the unemployment of such workers in Europe (due to the comparative inflexibility of European labor markets vis-à-vis those of the United States), has prompted a search for possible explanations.1 This search has become more acute in light of evidence that the adverse trend for unskilled workers has not yet been mitigated in the 1990s.
I thank Manmohan Agarwal, Don Davis, Vivek Dehejia, Bill Dickens, Robert Feenstra, Marvin Kosters, Robert Lawrence, Edward Leamer, Jacob Mincer, Arvind Panagariya, T. N. Srinivasan, and Martin Wolf for their helpful comments. Susan Collins deserves special thanks for many careful and constructive suggestions. A first draft of this paper was completed in February 1995 and revisions finalized in October 1995.____________________