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Trade and Wage Inequality in Developing Countries: South-South Trade Matter

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  • Julien GOURDON

    (Centre d'Etudes et de Recherches sur le Développement International)

Abstract

The relationship between trade liberalization and inequality has received considerable attention in recent years. The primary purpose of this paper is to present new results on the sources of wage inequalities in manufacturing taking into account South-South (S-S) trade. Globalization not only leads to increasing North-South (N-S) trade, but the direction and composition of trade has also changed. More trade is carried out between developing countries. We observe increasing wage inequality is more due to the South-South trade liberalization than to the classical trade liberalization with northern countries. The second purpose is to elucidate the link between the direction of trade and technological change, arguing that it might explain why we obtain different results for South-South trade and North-South trade on wage inequality. A part of this increasing wage inequality due to S-S trade comes from the development of N-S trade relationship in S-S trade which increases wage inequality in middle income developing countries. However the fact that S-S trade is more skill intensive sector oriented increase wage inequality for all developing countries.

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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 200710.

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Length: 53
Date of creation: 2007
Date of revision:
Handle: RePEc:cdi:wpaper:896

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Keywords: international trade; Wage Inequality; Skill-biased technical change;

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References

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  1. Attanasio, Orazio & Goldberg, Pinelopi & Pavcnik, Nina, 2003. "Trade Reforms and Wage Inequality in Colombia," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4023, C.E.P.R. Discussion Papers.
  2. Rama, Martin, 2003. "Globalization and workers in developing countries," Policy Research Working Paper Series, The World Bank 2958, The World Bank.
  3. Sylvain Chabe-Ferret & Julien Gourdon & Mohamed Ali Marouani & Tancrède Voituriez, 2011. "Trade-Induced Changes in Economic Inequality: Assessment Issues and Policy Implications for Developing Countries," Working Papers, HAL halshs-00557108, HAL.
  4. Thoenig, Mathias & Verdier, Thierry, 2002. "A Theory of Defensive Skill-based Innovation and Globalization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3416, C.E.P.R. Discussion Papers.
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  7. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1769, Harvard - Institute of Economic Research.
  8. Keller, Wolfgang, 1996. "Absorptive capacity: On the creation and acquisition of technology in development," Journal of Development Economics, Elsevier, Elsevier, vol. 49(1), pages 199-227, April.
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  13. Amelia Santos-Paulino & A. P. Thirlwall, 2004. "The impact of trade liberalisation on exports, imports and the balance of payments of developing countries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(493), pages F50-F72, 02.
  14. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc.
  15. Lopez, Humberto, 2006. "Growth and inequality: Are the 1990s different?," Economics Letters, Elsevier, Elsevier, vol. 93(1), pages 18-25, October.
  16. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, Elsevier, vol. 51(1), pages 99-116, October.
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Cited by:
  1. Ucal, Meltem & Bilgin, Mehmet Huseyin, 2009. "Income Inequality and FDI in Turkey: FM-OLS (Phillips-Hansen) Estimation and ARDL Approach to Cointegration," MPRA Paper 48765, University Library of Munich, Germany.
  2. Alberto Behar, 2013. "The Endogenous Skill Bias of Technical Change and Inequality in Developing Countries," IMF Working Papers, International Monetary Fund 13/50, International Monetary Fund.

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