Proponents of free trade routinely argue that an important benefit
for developing countries is that it provides significant economic
opportunities for their asset-less workers. By now, virtually all
developing countries, have moved towards integrating themselves
more closely with the international economy. To what extent have
workers actually benefited from this integration? The Impact of
Trade on Labor attempts to piece together broad-based evidence on
the effects of trade liberalization on labor markets in developing
countries in general, and selected countries from developing Asia
in particular. The analysis of the available evidence takes into
account the recent theoretical advances in this area.
The volume consists of nine substantive chapters separated into two
parts. A main contribution of the first part is to use a blend of
both theory and empirics to point out that the impact of trade
liberalization on labor markets, including adjustment costs,
depends in important ways on domestic labor market regulations and
the nature of competition or market structure. Part I of the volume
also presents a detailed discussion on the issue of labor
standards, including whether trade access should be linked to a
country's labor standards.
The second part of the volume moves on to a consideration of
various related issues in three large and labor intensive
countries, China, India and Indonesia. The approach taken in these
studies is to focus on a specific issue of interest and examine
this issue carefully for one country using available data. Thus the
chapter on China examines the linkages between foreign direct
investment and domestic labor standards; the Indonesia
chapterassesses the relationship between trade and wage inequality
between skilled and unskilled workers; and the chapter on India
focuses more broadly on how trade liberalization has impacted
employment in the manufacturing sector, paying special attention to
the issue of labor market regulations.
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