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Trade openness and wage distribution in Chile

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  • Elisa Borghi

    (CESPRI, Università Bocconi, Milano, Italy)

Abstract

This article analyses the effect of trade openness, implemented in Chile after 1974, on wage inequality. In the first part, this study analyses inequality and wage distribution in Chile. Workers are grouped in three categories, according to the educational level reached, in order to discriminate between skilled and unskilled labor and calculate the wage gap. The wage gap between workers with a university degree and laborers that completed the secondary school increased during the period analyzed. The wage gap between workers with secondary education completed and laborers that completed the first cycle of education decreased in the period. The second part of this article investigates the relationship between wage inequality dynamics of different groups of workers and trade openness. The empirical results suggest that trade liberalization increased wage differences between workers with a university degree and workers with a high school degree, while it did not affect the decreasing wage gap between laborers with secondary school completed and laborers with primary school completed. This paper is made up of six sections. Section I introduces the analysis. Section II describes briefly the trade liberalization process. Section III analyses the wage distribution in Chile and a measure of the wage gap between more educated and less educated workers is obtained. Section IV presents some theoretical aspects. Section V analyses the effects of the trade liberalization on the wage gap, considering different groups of workers, according to the educational level. Section VI concludes.

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Bibliographic Info

Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 173.

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Length: 32 pages
Date of creation: Sep 2005
Date of revision: Sep 2005
Handle: RePEc:cri:cespri:wp173

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Related research

Keywords: Trade openness; Inequality; Skill premium;

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References

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  1. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
  2. Nina Pavcnik, 2000. "What Explains Skill Upgrading in Less Developed Countries?," NBER Working Papers 7846, National Bureau of Economic Research, Inc.
  3. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  4. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
  5. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
  6. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June.
  7. Jones, Ronald W & Engerman, Stanley L, 1996. "Trade, Technology, and Wages: A Tale of Two Countries," American Economic Review, American Economic Association, vol. 86(2), pages 35-40, May.
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Cited by:
  1. Jorge Friedman & Nanno Mulder & Sebastián Faúndez & Esteban Pérez Caldentey & Carlos Yévenes & Mario Velásquez & Fernando Baizán & Gerhard Reinecke, 2011. "Openness, Wage Gaps and Unions in Chile: A Micro Econometric Analysis," OECD Trade Policy Papers 134, OECD Publishing.

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