Abstract:
The relationship between trade, employment and wages is far from settled. This paper surveys the literature dealing with this relationship with a view to identifying any stylized facts and proposing areas for future research. Beyond the link between trade, employment and wages, the paper also explores the impact of trade on heterogeneity and imperfect competition, productivity, and institutions.
On the stylized facts, the paper notes, for example, that much of the short-run impacts of trade and trade reforms involve reallocation of labor or changes in wages within sectors, and that wage responses to trade and trade reforms are generally greater than employment impacts. On future research, the paper points out gaps with respect to such areas as: who/what is protected, the actual/potential impact of trade liberalization on wages, inter-sectoral mobility, formal vs. informal sector responses to trade reform.
