Revisiting the Fallacy of Free Trade

REVIEW OF INTERNATIONAL ECONOMICS

Posted: 7 May 1998

See all articles by Channing Arndt

Channing Arndt

United Nations - World Institute for Development Economics Research (UNU/WIDER)

Thomas W. Hertel

Purdue University - Center for Global Trade Analysis; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Abstract

We examine results presented by Batra (1992) in an article, published in this Journal, entitled "The Fallacy of Free Trade." Batra contends that technical change in Japanese manufacturing necessarily reduces US real wages in the confines of a two good, two country Ricardo-Viner model. We construct a parsimonious empirical Ricardo-Viner model to analyze the same issue. We find that the impact on US real wages is very small. Systematic sensitivity analysis shows that increases in the real wage are as likely as decreases. We conclude that Batra's assertions are empirically unlikely.

JEL Classification: F11

Suggested Citation

Arndt, Channing and Hertel, Thomas W., Revisiting the Fallacy of Free Trade. REVIEW OF INTERNATIONAL ECONOMICS, Available at SSRN: https://ssrn.com/abstract=4067

Channing Arndt (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6 B
Helsinki, FI‐00160
Finland

Thomas W. Hertel

Purdue University - Center for Global Trade Analysis ( email )

Department of Agricultural Economics
1145 Krannert Building
West Lafayette, IN 47907-1145
United States
765-494-4199 (Phone)
765-494-9176 (Fax)

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

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