DP1069 | Labour Force Growth, Trade, and Employment


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This paper examines the implications of labour force growth in one region for wages, employment, and production patterns in other regions. These issues are first explored in a stylized dual model incorporating features of both standard factor-based trade models and models of two-way trade and returns to specialization. Sufficient conditions for positive trade linkages between labour force growth in one region and real wage and employment erosion in another are derived. These conditions are then examined in the context of non-OECD labour force growth, through a multi-region, multi-sector numerical model of the world economy.