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Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Front. Econ. China    2015, Vol. 10 Issue (4) : 629-642     DOI: 10.3868/s060-004-015-0029-1
research-article |
Would a North-South Free Trade Agreement Hurt Unskilled Labor in the North?
Chu-Ping Lo()
Department of Agricultural Economics, National Taiwan University, Taipei, Taiwan, China
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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.

Keywords international outsourcing      wage inequality      free trade agreement     
Issue Date: 28 December 2015
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