Publication

This paper describes how the Stolper-Samuelson Theory states that north-south trade reduces the real wage of unskilled labor in the north. The author questions the underlying assumption that trading countries are diversified and examines theoretically the trade-wage link when the south is completely specialized. The paper states that while it remains true that trade with the south negatively affects wages in the north, it is no longer the case that the poorer the trade partner is, the more harmful the trade is for northern wages. Rather the author explains that the negative wage impact is largest when the south has an intermediate capital-labor ratio, since then it may also act as a more efficient producer.