Would a North-South Free Trade Agreement Hurt Unskilled Labor in the North?
Journal
Frontiers of Economics in China
Journal Volume
10
Journal Issue
4
Pages
629-642
Date Issued
2015
Author(s)
Abstract
I present a simple model to examine the impact of international outsourcing on the welfare of skilled and unskilled labor. In this model, specialized business services are to facilitate manufacturing production, creating additional welfare gains in the presence of positive production externalities. Policies that favor the business service sector contribute to the development of a larger bundle of specialized business services, generating more welfare gains to not only skilled but also unskilled labor. Thus, a country's unskilled labor is not necessarily worse off with open trade if the country is prosperous in business service provisions.
SDGs
Type
journal article