Trade and relative wages: The role of supervisory function by skilled workers

The effect of trade on relative wages is examined taking into consideration some aspects of internal organization of firms, namely, the twin function of production and supervision by skilled workers. When trade is based on en dowment differences, the effect of trade is greater than is predicted by th e Stolper-Samuelson theorem. When trade is based on technological differenc es, freer trade tends to reduce the relative wages in each country in a two -country world economy. (C) 2001 Elsevier Science B.V, All rights reserved. JEL classification: F11; J31.