Are Your Wages Set in Beijing?

Abstract

The economic troubles of less-skilled workers in the United States. and OECD-Europe during a period of rising manufacturing imports from third world countries has created a debate about whether, in a global economy, wages or employment are determined by the global rather than domestic labor-market conditions. One side argues that trade is all that matters; another side, that trade does not matter at all. The author rejects these polar views; empirical analysis has found modest but real trade effects in displacement of less-skilled labor and declines in the price of goods produced by low-skilled workers.