On Globalisation, Trade and Wages

Low skilled workers have been facing declining real wages during the 80s in the US, while high skilled workers gained in the same period.This decrease in the relative wage of the low skilled provoked a lively debate on the causes of the observed decline.A lot of academic authors have opposed to the popular view that trade with low wage countries caused the relative deterioration of low skilled workers.This paper addresses the central question, whether we can ignore the role for trade on the basis of existing literature.To answer this question, we first set forth basic trade theory.Next the theoretical basis for empirical validation is established, whereafter the empirical contributions of several authors are reviewed.Finally alternative explanations are assessed.On the basis of this survey we argue that the denial of a role for trade by a number of contributors to the debate is not convincing.