Belgium central bank paper reviews effects of trade liberalisation in low-wage countries
A National Bank of Belgium paper shows that trade liberalisation with low-wage countries leads to less reallocation from low-skill-intensity industries to high-skill-intensity industries.
Catherine Fuss and Linke Zhu, the paper's authors, use Belgian manufacturing firm- and firm-product-level data from 1997 to 2007 to determine the effect of trade liberalisation on resource reallocation. The authors first provide evidence on industry integration induced by multi-product firms producing simultaneously in multiple industries and on the extent to which industry integration occurs between industries that have different degrees of comparative advantage.
The results indicate that within more closely integrated sectors, trade liberalisation with low-wage countries leads to less reallocation from low-skill-intensity industries to high-skill-intensity industries, both in terms of employment and output. They also find that more integrated industries experience less skill upgrading after trade liberalisation with low-wage countries.
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