Papers by Professor Donald Davis:
        NBER Working Paper 5693, 1996.
Abstract: Empirical work relating trade liberalization and income distribution has identified an important anomaly. The Stolper-Samuelson theorem suggests that trade liberalization will shift income toward a country's abundant factor. For developing countries, this suggests liberalization will principally benefit the abundant unskilled labor. Yet extensive empirical studies have identified many cases with a contrary result. This paper develops a simple theoretical hypothesis to account for this anomaly. It shows that countries which are labor abundant in a global sense may see wages decline with liberalization if they are capital abundant in a local sense. The current absence of empirical work that would allow us to identify the relevant local abundance implies that virtually all assertions regarding anticipated distributional consequences of trade liberalization are without foundation.
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