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Would a North-South Free Trade Agreement Hurt Unskilled Labor in the North?

Author

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  • Chu-Ping Lo

    (Department of Agricultural Economics, National Taiwan University, Taipei, Taiwan, China)

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.

Suggested Citation

  • Chu-Ping Lo, 2015. "Would a North-South Free Trade Agreement Hurt Unskilled Labor in the North?," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 10(4), pages 629-642, December.
    • Handle: RePEc:fec:journl:v:10:y:2015:i:4:p:629-642
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-004-015-0029-1
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    More about this item

    Keywords

    international outsourcing; wage inequality; free trade agreement;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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