How Trade Hurt Unskilled Workers

This paper argues that the main cause of the deteriorating economic position of unskilled workers in the United States and other developed countries has been expansion of trade with developing countries. In the framework of a Heckscher-Ohlin model, it outlines the evidence in support of this view, responds to criticisms of this evidence, and challenges the evidence for the alternative view that the problems of unskilled workers are caused mainly by new technology. The paper concludes with a look at the future and at the implications for public policy.