TRADE WITH ASIA AND SKILL UPGRADING - EFFECTS ON LABOR-MARKETS IN THEOLDER INDUSTRIAL-COUNTRIES

Trade with Asia and Skill Upgrading: Effects on Factor Markets in the Older Industrial Countries. - The trade and labor nexus is examined wi th a model incorporating refinements which weaken the H-O-S result tha t free trade can cause factor rewards to equalize. Asian growth and ri sing openness in the period 1970-1992, taken in isolation, are found t o cause real wages to rise there, even for production workers. Althoug h they also cause increased wage dispersion, the magnitude is small co mpared with the effects of skill upgrading. Projections to 2010, which combine further expansion in imports from Asia with continued Norther n skill upgrading, yield declining real wages and/or unemployment for both production and farm workers. Restricting imports from Asia is fou nd to be an ineffective response.