TY  - JOUR
AU  - Davis,Donald R.
TI  - Trade Liberalization and Income Distribution
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5693
PY  - 1996
Y2  - August 1996
UR  - http://www.nber.org/papers/w5693
L1  - http://www.nber.org/papers/w5693.pdf
N1  - Author contact info:
Donald R. Davis
Columbia University, Department of Economics
1038 Intl. Affairs Building
420 West 118th St.
New York, NY 10027
Tel: 212/854-4037
Fax: 212/854-8059
E-Mail: drd28@columbia.edu
AB  - Empirical work relating trade liberalization and income distributed has iden- tified an important anomaly.  The Stolper-Samuelson theorem predict trade liberalization will shift income toward a country's abundant factor. For developing countries, this suggests liberalization will principally benefit the abundant unskilled labor.  Yet extensive empirical studies have identified many cases with a contrary result. This paper develops a simple theoretical explanation for this anomaly. It shows that countries which are labor abundant in a global sense may see wages decline with liberalization if they are capital abundant in a local sense.  The current absence of empirical work that would allow us to identify the relevant local abundance implies that virtually all assertions regarding anticipated distributional consequences of trade liberalization are without foundation.  There may likewise be important implications for industrialized countries that border developing countries undertaking trade liberalization, particularly in regard to the incentives for migration.
ER  -