The Labour Market Impact of Trade in Middle-income Countries: A Factor Content Analysis of Spain Asier Minondo 1. INTRODUCTION T HE impact of trade on labour markets has been the subject of much research, and controversy, in recent years. Most studies have focused on developed countries (the North), where some scholars have argued that trade with developing countries has been the main cause of the reduction in demand for unskilled workers (Wood, 1994a and 1998a; and Leamer, 1998). Other scholars, however, have argued that technological change, biased against unskilled workers, and not trade, is to blame for the deteriorating situation of unskilled workers in developed countries (Lawrence and Slaughter, 1993; Bhagwati and Dehejia, 1994; and Krugman and Lawrence, 1994). Regarding developing countries (the South) some scholars have argued that greater openness to trade boosts demand for unskilled workers, and thus tends to reduce wage inequality (Wood, 1997). Others, in contrast, have argued that the opposite is the case (Robbins, 1994; and Feenstra and Hanson, 1996). 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 (e.g. Balassa, 1986; and Sachs and Shatz, 1994), 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 ß Blackwell Publishers Ltd 1999, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA. 1095 ASIER MINONDO is from the Universidad de Deusto-ESTE, Spain. The research on which this paper is based was funded by the Diputacio ´n Foral de Gipuzkoa under the funding given to the Nazioarteko Azterketa Zentrua (NAZE). The author is grateful to Vicente Donoso, In ˜aki Erauskin, In ˜aki Pen ˜a, Mikel Navarro, Don Webber, Adrian Wood and two anonymous referees for very helpful comments. Any errors and omissions remain the author’s own responsibility.