TY  - JOUR
AU  - Rauch,James E.
AU  - Trindade,Vitor
TI  - Information and Globalization: Wage Co-Movements, Labor Demand Elasticity, and Conventional Trade Liberalization
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7671
PY  - 2000
Y2  - April 2000
UR  - http://www.nber.org/papers/w7671
L1  - http://www.nber.org/papers/w7671.pdf
N1  - Author contact info:
James E. Rauch
Department of Economics
University of California, San Diego
La Jolla, CA 92093-0508
Tel: 858/534-2405
Fax: 858/534-7040
E-Mail: jrauch@weber.ucsd.edu

Vitor Trindade
University of Missouri
Department of Economics
Columbia, MO  65211
E-Mail: TrindadeV@missouri.edu
AB  - We model home country familiarity with business opportunities in a foreign country as a parameter in a matching process between domestic and foreign firms.  We show that as familiarity increases the effect of relative national labor supplies on relative national wages declines, the elasticity of domestic labor demand increases, and the extent of  pass-through' of trade tax changes to home wages increases.  Since the volume of trade is increasing in familiarity, trade liberalization has a greater impact on wages when the initial volume of trade is greater, all else equal.  As familiarity becomes complete, the results of the 2 x 2 Heckscher-Ohlin-Samuelson model are obtained: relative national wages are fixed by trade taxes independent of relative national labor supplies, domestic labor demand is infinitely elastic, and pass-through of tax changes to wages is  complete' in the sense that it is determined entirely by production technology and no arbitrage opportunities remain.
ER  -