ABSTRACT
The standard trade theory traces favourable effects of trade liberalization on
employment through (a) a shift in comparative advantage towards labour-
intensive exports, and (b) a narrowing of the gaps between wages of unskilled
and skilled labour. However, greater specialization need not necessarily induce
an increase in global demand for labour-intensive goods to enable an increase in
employment. The standard trade theory is based on such unrealistic assumptions
as full employment, unified labour market and equal access to technology which
do not apply to such developing economies as China charaterized by surplus
labour and dualistic labour markets.
