Trade, Technology and the Labor Market in the South African Manufacturing Sectors

This paper advances on previous work on the effects of trade and technical change on labour markets within the framework of Heckscher- Ohlin trade theory. First, we employ dynamic heterogeneous panel estimation techniques not previously used in this context. Second, we provide evidence for an unskilled labour abundant developing country. Third, we examine endogeneity issues in the impact of technology and price changes on factor returns. For South African manufacturing we find that output prices increase most strongly in sectors that are labour intensive; that trade-mandated earnings increases are positive for labour, and negative for capital, whilst technology has mandated negative earnings increases for both factors. We also find that taking account of endogeneity is important in isolating factor and sector bias of technological change.