Question

Explain how trade barriers raise wages in protected industries by reducing average wages economy-wide.

Short answer

Because of trade barriers, there are various effects on industries and the economy.

Step-by-step solution

Step 1. Definition

Trade barriers are defined as the protectionist form of trade that is put by the governments to have a limited trade between various nations and economies.

Step 2. Explanation

A trade that happens on the basis of comparative advantage increases the average rate of wages in the economy and also decreases the income of import industries. And if a country is not trading on a comparative advantage basis the opposite will happen as the average wages decrease in the economy, while the workers in the protected industries would have an advantage.