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Trade Liberalization and the Wage Skill Premium: Evidence from Indonesia

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  • Amiti, Mary
  • Cameron, Lisa

Abstract

In this paper, we analyze the effect of reducing import tariffs on intermediate inputs and final goods on the wage skill premium within firms in Indonesia – a country with a high share of unskilled workers. We present a new finding that reducing input tariffs reduces the wage skill premium within firms that import their intermediate inputs. However, we do not find significant effects from reducing tariffs on final goods on the wage skill premium within firms.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8382.

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Date of creation: May 2011
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Handle: RePEc:cpr:ceprdp:8382

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Keywords: import tariffs; intermediate inputs; wage inequality;

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References

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  1. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
  2. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Inequality and Unemployment in a Global Economy," NBER Working Papers 14478, National Bureau of Economic Research, Inc.
  3. Brian McCaig, 2009. "Exporting Out of Poverty: Provincial Poverty in Vietnam and U.S. Market Access," ANU Working Papers in Economics and Econometrics 2009-502, Australian National University, College of Business and Economics, School of Economics.
  4. Gonzaga, Gustavo & Menezes Filho, Naercio & Terra, Cristina, 2006. "Trade liberalization and the evolution of skill earnings differentials in Brazil," Journal of International Economics, Elsevier, vol. 68(2), pages 345-367, March.
  5. Zhu, Susan Chun & Trefler, Daniel, 2005. "Trade and inequality in developing countries: a general equilibrium analysis," Journal of International Economics, Elsevier, vol. 65(1), pages 21-48, January.
  6. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "Trade, Wages and the Political Economy of Trade Protection: Evidence from the Colombian Trade Reforms," CEPR Discussion Papers 3877, C.E.P.R. Discussion Papers.
  7. Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
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  13. Krueger, Alan B, 1993. "How Computers Have Changed the Wage Structure: Evidence from Microdata, 1984-1989," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 33-60, February.
  14. Daniel Trefler, 2001. "The Long and Short of the Canada-U.S. Free Trade Agreement," NBER Working Papers 8293, National Bureau of Economic Research, Inc.
  15. Donald R. Davis & James Harrigan, 2007. "Good Jobs, Bad Jobs, and Trade Liberalization," NBER Working Papers 13139, National Bureau of Economic Research, Inc.
  16. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
  17. Bradford J Jensen & Andrew B Bernard, 1994. "Exporters, Skill Upgrading And The Wage Gap," Working Papers 94-13, Center for Economic Studies, U.S. Census Bureau.
  18. Amiti, Mary & Konings, Jozef, 2005. "Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia," CEPR Discussion Papers 5104, C.E.P.R. Discussion Papers.
  19. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
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  21. Chun , Natalie & Khor, Niny, 2010. "Minimum Wages and Changing Wage Inequality in Indonesia," ADB Economics Working Paper Series 196, Asian Development Bank.
  22. Naercio Menezes Filho & Naercio Menezes Filho, 2006. "Trade Liberalization and the Demand for Skilled Labor in Brazil," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  23. Utsav Kumar & Prachi Mishra, 2008. "Trade Liberalization and Wage Inequality: Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 291-311, 05.
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Citations

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Cited by:
  1. Rafaelita Aldaba, . "Impact of Trade Liberalization on Wage Skill Premium in Philippine Manufacturing," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).
  2. Crinò, Rosario, 2012. "Imported inputs and skill upgrading," Labour Economics, Elsevier, vol. 19(6), pages 957-969.
  3. Bernard, Andrew B. & Jensen, J Bradford & Redding, Stephen J. & Schott, Peter K., 2011. "The Empirics of Firm Heterogeneity and International Trade," CEPR Discussion Papers 8677, C.E.P.R. Discussion Papers.
  4. Liu, Dan, 2013. "International trade and wage inequality: A non-monotonic relationship," Economics Letters, Elsevier, vol. 121(2), pages 244-246.
  5. Ana Cecília Fieler & Marcela Eslava & Daniel Xu, 2014. "Trade, Skills, and Quality Upgrading: A Theory with Evidence from Colombia," NBER Working Papers 19992, National Bureau of Economic Research, Inc.
  6. Sadayuki Takii & Dionisius Narjoko, . "Revisiting How Globalization Affects Wage Skill Premium in Indonesia Manufacturing," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).
  7. Massimiliano Calì, 2012. "Trade Liberalisation Does Not Always Raise Wage Premia: Evidence from Ugandan Districts," SERC Discussion Papers 0114, Spatial Economics Research Centre, LSE.
  8. Chin Hee Hahn & Dionisius Narjoko, . "Introduction and Overview," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).
  9. Ayumu Tanaka, 2012. "The Causal Effects of Exporting on Domestic Workers:A Firm-Level Analysis using Japanese Data," Discussion papers e-11-009, Graduate School of Economics Project Center, Kyoto University.
  10. Baumgarten, Daniel, 2013. "Exporters and the rise in wage inequality: Evidence from German linked employer–employee data," Journal of International Economics, Elsevier, vol. 90(1), pages 201-217.
  11. L. Alan Winters, 2014. "Globalization, Infrastructure, and Inclusive Growth," Trade Working Papers 23974, East Asian Bureau of Economic Research.
  12. Kis-Katos, Krisztina & Sparrow, Robert, 2013. "Poverty, Labour Markets and Trade Liberalization in Indonesia," IZA Discussion Papers 7645, Institute for the Study of Labor (IZA).
  13. Archanun Kohpaiboon & Juthatip Jongwanich, . "Global Production Sharing and Wage Premium: Evidence from Thai Manufacturing," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).
  14. Hiroyuki Kasahara & Yawen Liang & Joel Rodrigue, 2013. "Does Importing Intermediates Increase the Demand for Skilled Workers? Plant-level Evidence from Indonesia," CESifo Working Paper Series 4463, CESifo Group Munich.
  15. Jayanthakumaran, Kankesu & Sangkaew, Piyapong & O’Brien, Martin, 2013. "Trade liberalisation and manufacturing wage premiums: Evidence from Thailand," Journal of Asian Economics, Elsevier, vol. 29(C), pages 15-23.

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