Re: population, migration and the politometric evidence

At 01:41 PM 06/19/2000 +0200, Arno Tausch wrote:

>The 'beef' of these arguments is that an early demographic transition
>favours re-distribution and encourages steps away from the extensive
>development model, already analysed by Jose Carlos Mariategui at the
>beginning of the last Century. It also turns out that migration benefits the
>centers and not the semi-peripheries and peripheries, but that income
>inequality increases in the centers due to the increase in the labor supply.
>A policy, aiming at rapidly integrating the immigrant population could
>counteract these tendencies.
>
>Populists here on this side of the Atlantic and propositionists over the Big
>Pot got it all wrong, therefore.
>



Another argument along this same line, although with a different theoretical explanation for increasing (wage) inequality in developed countries, is a 1996 article by Jeffrey D. Sachs and Howard J. Shatz in _The American Economic Review_.  These authors argue that present a number of potential theoretical linkages between trade and rising wage inequality in the U.S.: 

(1) first, the Heckscher-Ohlin-Samuelson formulation of the principle of comparative advantage and the associated Stolper-Samuelson theorem predict that in a two-sector world with two factors of production, skilled and unskilled labor, and without specialization, the relative wage of unskilled labor falls if the relative price of low-skilled labor-intensive output declines (as it is
supposed to when trade is introduced). 

(2) Second, even if the relative price of low-skilled labor intensive-output does not fall, the relative wage of unskilled labor can fall in the presence of capital flows (and outsourcing) to the developing countries from low-skill intensive sectors; increased import competition for monopolistic sectors; or
skill-biased technical changes in response to the growth of the global
marketplace for U.S. products. 

The analysis uncovers "considerable circumstantial evidence that international trade is playing at least some role in the recent widening of wage inequalities." Even so, the authors believe that "the labor force will respond to the widening of the premium on education by increasing the investment in education, thereby narrowing the gap in inequality in the future. . . . Increased investment in schooling and job training, possibly
combined with compensatory adjustment assistance for workers most hurt by
trade shocks, are likely to be the most effective policy responses to
recent shifts in the international trading environment" (Sachs and Schatz 1996)

Sachs and Shatz believe that free trade is "likely to be beneficial for the vast majority of the U.S. population" and be "a critical spur to long term growth [and] vital to the long-term growth prospects of developing countries" (all of which has about it the suspicious feel of a genuflection to orthodox economic theory). Even so, they dismiss the argument that trade has played a small or insignificant role in widening wage inequalities between skilled and unskilled workers in the U.S.

REFERENCES

Sachs, Jeffrey D., and Howard J. Shatz. "U.S. trade with developing
countries and wage inequality." _The American Economic Review_ 86, no.  2
(May 1996): 234-239.
--
Jeffrey L. Beatty
Doctoral Student
Department of Political Science
The Ohio State University
2140 Derby Hall
154 North Oval Mall
Columbus, Ohio 43210

(o) 614/292-2880
(h) 614/688-0567

Email:  Beatty.4@osu.edu
______________________________________________________   
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