Essays in Honour of Peter Lloyd, Volume I
Edited by Sisira Jayasuriya
1. Real wages and trade: insights from extreme examples Roy J. Ruﬃn and Ronald W. Jones* The eﬀect of international trade on wage rates within a country has been the object of much scrutiny in journal articles, conferences and the wider media. The classic theoretical observation dates back to the 1941 article by Wolfgang Stolper and Paul Samuelson wherein the eﬀects of commercial policy or of more open trade on real wage rates were seen to depend only upon the factor intensity ranking of a nation’s import-competing product with its exportables. Their theorem presupposed that productive factors had the same high degree of ability to relocate from one industrial activity to another. However, labour is often thought of as diﬀerent from other productive factors, in being more mobile between sectors compared with capital or natural resources, and modelling of such an asymmetry leads naturally to the speciﬁc-factors model (Jones, 1971; Samuelson, 1971). In this context a quarter century ago Ruﬃn and Jones (1977) argued that there was a presumption that international trade would lead to real wage gains for labour, regardless of the pattern of trade. James Melvin and Robert Waschik (2001) recently questioned this result; they provided a computergenerated example wherein labour would suﬀer real wage losses with any kind of international trade. In response, Jones and Ruﬃn (2004) probed more deeply into the properties of speciﬁc-factors models to emphasize that asymmetries between sectors in labour intensity as well as...
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