Trade and Jobs in Europe: Much Ado about Nothing?

By Mathias Dewatripont; André Sapir et al. | Go to book overview

the possibility of conducting several different types of simulation experiments within one model, the relationship between different existing approaches may be clarified. For example, the results presented here suggest that a factor content calculation of the labour market impact of trade may in some cases be a good approximation to the full impact of trade on labour demands, but in other case may miss very significant effects. Running alternative experiments within a single model also helps clarify the nature of the assumptions being made in the different cases, in particular that the exogenous change must be different in a simulation of a trade change with factor prices fixed from a simulation of the same trade change with factor markets clearing.

The most important conclusion of the chapter, however, is that any model, whether or not of the CGE type, based on the assumptions that goods within a reasonably broad industrial classification are homogeneous and that there is a small number of homogenous factors of production, is likely to miss much of the impact of trade on the relative fortunes of skilled and unskilled workers in advanced economies.


References

Abd-el-Rahman K. ( 1991), "'Firms' Competitive and National Comparative Advantages as Joint Determinants of Trade Composition'", Weltwirtschaftsliches Archiv, 127: 83-97.

Allen C., Gasiorek M. and Smith A. ( 1996), Trade Creation and Trade Diversion, The Single Market Review, Subseries IV: volume 3, Office of Official Publications, Luxembourg.

Alogoskoufis G. et al. ( 1995), Unemployment: Choices for Europe, Monitoring European Integration, 5, Centre for Economic Policy Research, London.

Cortes O. and Jean S. ( 1996), "'Pays émergents, emploi déficient?'", document de travail, no. 96-105, CEPII, Paris, March.

Davies S. and Lyons B. (eds.) ( 1996), Industrial Organisation in the European Union, Oxford University Press, Oxford.

Deardorff A. V. and Hakura D. S. ( 1994), "'Trade and Wages: What are the Questions?'", in J. Bhagwati and M. H. Kosters (eds.), Trade and Wages, AEI Press, Washington DC, pp. 76-107.

Dixit A. K. and Stiglitz J. E. ( 1977), "'Monopolistic Competition and Optimum Product Diversity'", American Economic Review, 67: 297-308.

Freeman R. ( 1995), "'Are your Wages Set in Beijing?'", Journal of Economic Perspectives, 9(3, Summer): 15-32.

Gasiorek M., Smith A. and Venables A. J. ( 1992), "'1992: Trade, Factor Prices and Welfare in General Equilibrium'", in L. A. Winters (ed.), Trade Flows and Trade Policy after '1992', Cambridge University Press and Centre for Economic Policy Research, Cambridge, pp. 35-63.

Gasiorek M., Smith A. and Venables A. J. ( 1994), "'Modelling the Economic Effects of Interpenetration between the European Community and the Countries of Eastern Europe'", European Economy, 6: 521-38.

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