Input Trade: An Alternative Explanation

Abstract

Of late, a few trade theorists have advocated that direct foreign investments, factor flows and trade in intermediate products can be the likely sources of symmetric changes in the wage-gap across the North and South. Markusen and Venables (1996) emphasize the role of multinationals to be more important as they alter the nature of trade from trade in final goods to trade in skill-intensive producer services. That direct foreign investment may explain the wage-gap phenomenon has also been advocated by Feenstra and Hanson (1996, 2001), Lawrence (1994) and Slaughter (1994)