Trade, wages, and the specific factors model: empirical evidence from manufacturing industries in Ghana

Abstract

This study analyzes the impact of trade on wages in the context of the specific factors model by focusing on the link between trade and the average real wage. A recent paper by Jones and Ruffin (Rev Int Econ, 16:234-249, 2008) shows how one can use the specific factors model to predict how labor should fare from an improvement in the terms of trade. For this purpose, I use annual firm-level data on the manufacturing sector in Ghana during the period 1991-1997. I find that a ceteris paribus increase in the price of exportables in the wood industry would help labor but labor would be hurt by price increases in the food-baker, furniture, textile-garment, and metal-machinery industries.