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Low-wage competition: pains from trade for medium-wage countries

Arnold, Lutz G. ; Heyna, Michael



Abstract

The entry of a low-wage country into a world economy with preexisting wage differentials puts the gains from trade in a former low-wage and then medium-wage country under pressure. If negotiations over the formation of a free trade area cover international transfers, there is a strong presumption that they bring about global free trade and compensation of the medium-wage country if necessary. In ...

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