In this paper we demonstrate that intra-industry trade (or FDI) between identical countries could produce the observed deterioration in the relative wages of unskilled workers. This involves a model of North-North integration through either increased trade flows or increased MNE- based production. Our motivation in this regard is arguments to the effect that trade cannot be responsible for the observed labour market trends because trade with developing countries is quantitatively too small to have significant labour market effects. We also introduce a relatively unexploited class of model that possesses attractive properties with respect to the explicit incorporation of firm-theoretic considerations in trade models.

FDI and wages, globalization and employment, trade and employment, trade and wages
Economic Integration (jel F15), Trade and Labor Market Interactions (jel F16), Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. (jel J31)
hdl.handle.net/1765/6947
Tinbergen Institute Discussion Paper Series
Tinbergen Institute

François, J.F, & Nelson, D.R. (2000). Victims of Progress: Economic Integration, Specialization, and Wages for Unskilled Labor (No. TI 00-065/2). Tinbergen Institute Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/6947