Trade liberalisation, technical change and relative wages

Abstract

In the trade and wages debate worldwide, one of the economic puzzles of the last 25 years has been the decline in real wage rates around the world. This issue is sometimes expressed in terms of a decline in unskilled wage rates relative to skilled rates, and sometimes as here in terms of real wage movements relative to product prices. Standard trade theory provides a framework to analyse this hypothesis by drawing the links between trade liberalisation and factor returns. Finally, this paper closes with some discussion of what might be done about the problem of real wage stagnation.