Over the last two decades a number of developing countries have moved to liberalize their trade regimes. Proponents of these liberalizations typically argue that one of the chief beneficiaries of greater openness to trade are the workers in these countries. In particular, given abundant supplies of labor trade liberalization encourages producers to reallocate output toward labor-intensive goods. Depending on conditions in labor markets, the resulting increase in the demand for labor translates into some combination of an increase in employment and/or wages.
While the logic of this argument is fairly compelling and is generally supported by the experience of the "early" liberalizers the Newly Industrialized Economies of East Asia (Hong Kong, Korea, Singapore and Taiwan) more recent episodes of trade liberalization appear not to have been associated with large improvements in prospects for the typical worker (Robbins, 1996; Wood 1997).
There are various factors that may explain the apparent divergence between the expectations of liberalization advocates and the recent evidence. For instance, suppose that trade liberalization leads to an inflow of new technologies from abroad. To the extent that new technologies are increasingly skill biased as growing evidence suggests is the case the recent episodes of trade liberalization may lead to an increased demand for workers, but essentially the small minority with relatively high skills (Wood, 1997).
