Early morning lecture; Economic lntegration, Wages and Equality.

I decided to dig out some of my old university lectures on CD this morning to listen to on the way to work. It was an interesting lecture looking at the effects of trade liberalisation on the equality of outcome in developing countries.

The main thrust of the debate was around standard integration theory and it's application to debates of opening up trade into Latin America, this is a very interesting idea as it would appear that when trade in Mexico was liberalised it was assumed that the effect would be the same as other developing countries, however unlike East Asia Latin America does not have an excess of unskilled labour, instead it is a semi-skilled area.

In integration theory it is a widely accepted fact that the abundant resource benefits and the scarce resource losses out, in developed countries that means that the unskilled workers lose out and the skilled workers gain, and vice versa in East Asia, this is where, in developed states, taxation comes in to redistribute resources to the most vulnerable. In the developing country the burden falls on the better off who are much better able to diversify and adapt.

The problem with Mexico however is that they do not have an abundance of unskilled workers and as a result the unskilled workers lose out, and in a middle income country the taxation and administration system is not developed enough to cope.

Of cause as a strong believer in capitalism and its key role in removing inequality in the global market place I was delighted to discover that despite these miss calculations the percentage of people living in poverty still fell, just not by as much as expected.