《Trade and Wages A Deeper Investigation》.pdf

Trade and Wages: A Deeper Investigation Ronald W. Jones University of Rochester Roy J. Ruffin University of Houston When does international trade hurt workers? The classic answer provided by Wolfgang Stolper and Paul Samuelson (1941) presumed a Heckscher-Ohlin scenario in which only two commodities are produced with two productive factors completely mobile between sectors. The factor-intensity ranking of traded commodities told all, with real wages in the country importing the labor-intensive commodity unambiguously worsened if it should lower protective barriers to trade, while real wages in the exporting country would rise.1 This answer has proved popular not only because it is simple, but it also has minimal data requirements (Edward Leamer, 1998). However, there is another simple model that emphasizes the distinction between factors that are specific to individual sectors and a more mobile factor like labor (Ronald Jones, 1971 and Samuelson, 1971), which provides a richer set of criteria for judging the effect of trade on wage rates. In the specific-factors model the crucial defining technological characteristic that points to the asymmetry between sectors is what we call the intensity- elasticity nugget. Here we investigate not only its role in determining how changes in the terms of trade affect real wages and the pattern of trade, but also how the size of this nugget itself may be affected by such price changes. 1 This remark assumes that the same commodity is labor intensive in both importing and exporting countries. In the many-commodity case other outcomes are possible, even in the absence of technological factor-intensity reversals (Ronald Jones , 2002).