The labour market impact of trade in middle-income countries: A factor content analysis of Spain

This paper, in contrast to the above-mentioned studies, which have focused either on developed countries or on developing countries, analyses the impact of trade on middle-income countries' labour markets, taking Spain as a case study. As in many previous studies on this subject, factor content calculations are used to analyse the labour-market impact of trade. However, because it focuses on middle-income countries, this paper follows a different methodological approach to those used in previous North-South trade studies. Firstly, trade is divided between two sets of trading partners: richer countries and poorer countries, and the factor content of trade with each set is calculated separately in order to distinguish the impact of each trading partner on the demand for labour in the middle-income country. Secondly, following the insight of Krueger (1983) and Wood (1994a), the factor content of trade calculations take into account non-competing goods in middle-income countries' imports both from richer and poorer countries. The paper is organised as follows. The following section analyses whether Spain can be considered a middle-income country. Section 3 outlines the theory. Section 4 presents the methodology used in the empirical analysis. Section 5 discusses the data used to perform factor content of trade calculations. Section 6 presents the results of the empirical research, and the final section concludes.