Discussion Paper

No. 2011-48 | November 23, 2011
International Trade and Polarization in the Labor Market


The paper builds an argument that international trade can be one explanation behind polarization of employment in the labor market observed in developed countries such as U.K. and U.S. It considers a small open economy, having production sectors which use three types of labor: high-skill, middle-skill and low-skill. The economy faces an increase in the relative price of the high-skill intensive sector. Using decision rules for choosing middle-skill and low-skill education, it is shown that such a terms of trade shock can lead to higher shares of high-skill as well as low-skill workers in the total workforce. The effects off-shoring on wages and job composition are also studied. That of low-skill and high-skill tasks, not middle-skill tasks, is shown to contribute towards polarization in job composition.

JEL Classification:

F16, J21


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Cite As

Satya P. Das (2011). International Trade and Polarization in the Labor Market. Economics Discussion Papers, No 2011-48, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2011-48

Comments and Questions

Anonymous - Referee Report 1
January 16, 2012 - 10:50

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Anonymous - Referee Report 2
January 25, 2012 - 08:51

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Satya Das - Reply to Referee Report 1
February 02, 2012 - 14:08

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Satya Das - Reply to Referee Report 2
February 02, 2012 - 14:09

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