Trade Liberalization and Labour Markets: Perspective from OECD Economies


Michael Landesmann, Sebastian Leitner and Robert Stehrer

wiiw Working Paper No. 20, October 2001

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This study looks at the relationship between trade integration and labour markets for a group of OECD economies (USA, Japan, France, Germany, Netherlands, Sweden, United Kingdom). We examine particularly trade relationships between these OECD economies and different groups of 'Southern' economies: Southern Europe, the advanced South East Asian economies, a larger group of developing and catching-up economies, and transition countries from Central and Eastern Europe. The analysis uses a disaggregated data-set comprising 23 manufacturing industries for which production, employment and trade statistics were compiled. It looks at the differentiated pattern of trade integration over the period 1980-96 and examines labour market effects (on employment and on wages) both at a descriptive level and by means of econometric analysis. Evidence for trade effects on labour market variables is found, although the pattern of trade integration proceeds quite differently from what a Heckscher-Ohlin framework would expect. The pattern is much more compatible with a dynamic Ricardian model with catching-up features.


Keywords: trade liberalization, labour markets, OECD economies, North-South trade

JEL classification: C21, F14, F15, F16, L6

Countries covered: Germany, Japan, OECD, USA

Research Areas: Labour, Migration and Income Distribution, International Trade, Competitiveness and FDI