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Trade Liberalization and the Evolution of Skill Earnings Differentials in Brazil

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  • Gustavo Gonzaga

    (Department of Economics, Ponti�cal Catholic University, Rio)

  • Naércio Menezes Filho

    (Department of Economics, University of São Paulo)

  • Cristina Terra

    (Graduate School of Economics, Fundação Getulio Vargas)

Abstract

Skilled labor earnings differentials decreased during the trade liberalization implemented in Brazil from 1988 to 1995. This paper investigates the role of trade liberalization in explaining these relative earnings movements. We perform several independent empirical exercises that check the traditional trade transmission mechanism, using disaggregated data on tari¤s, prices, wages, employment and skill intensity. We find that: i)employment shifted from skilled to unskilled intensive sectors, and each sector increased its relative share of skilled labor; ii) relative prices fell in skill intensive sectors; iii) tariff changes across sectors were not related to skill intensities, but the pass-through from tariffs to prices was larger in skill intensive sectors; iv) the decline in skilled earnings differentials mandated by the price variation predicted by trade is very close to the observed one. The results are compatible with trade liberalization accounting for the observed relative earnings changes in Brazil.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 216.

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Length: 37
Date of creation: 23 Jun 2006
Date of revision:
Handle: RePEc:csl:devewp:216

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Keywords: Skill Earnings Differentials; Trade Liberalization; Tariffs Pass-through; Stolper-Samuelson;

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  1. Eli Berman & John Bound & Stephen Machin, 1998. "Implications Of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1245-1279, November.
  2. Gonzaga, Gustavo & Menezes Filho, Naercio & Terra, Cristina, 2006. "Trade liberalization and the evolution of skill earnings differentials in Brazil," Journal of International Economics, Elsevier, Elsevier, vol. 68(2), pages 345-367, March.
  3. Miguel Székely & Nancy Birdsall & Jere R. Behrman, 2000. "Economics Reform and Wage Differentials in Latin America," IDB Publications 6476, Inter-American Development Bank.
  4. Robert E. Baldwin & Glen G. Cain, 1997. "Shifts in U.S. Relative Wages: The Role of Trade, Technology and Factor Endowments," NBER Working Papers 5934, National Bureau of Economic Research, Inc.
  5. Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Have Falling Tariffs and Transportation Costs Raised US Wage Inequality?," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 630-650, 09.
  6. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  7. David Autor & Lawrence Katz & Alan Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 756, Princeton University, Department of Economics, Industrial Relations Section..
  8. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 40(1), pages 7-72, March.
  9. Alan Krueger, 1997. "Labor Market Shifts and the Price Puzzle Revisited," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 754, Princeton University, Department of Economics, Industrial Relations Section..
  10. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, Elsevier, vol. 64(2), pages 387-409, December.
  11. Matthew J. Slaughter, 2000. "What Are the Results of Product-Price Studies and What Can We Learn from Their Differences?," NBER Chapters, in: The Impact of International Trade on Wages, pages 129-169 National Bureau of Economic Research, Inc.
  12. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1980. "Heckscher- Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 95(2), pages 203-24, September.
  13. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, American Economic Association, vol. 93(3), pages 709-728, June.
  14. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, Elsevier, vol. 59(1), pages 103-123, June.
  15. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(2), pages 367-97, May.
  16. Johnson, George & Stafford, Frank, 1999. "The labor market implications of international trade," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 34, pages 2215-2288 Elsevier.
  17. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 67-97, March.
  18. 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.
  19. Jere R. Behrman & Nancy Birdsall & Miguel Székely, 2003. "Economic Policy and Wage Differentials in Latin America," Working Papers, Center for Global Development 29, Center for Global Development.
  20. repec:fth:prinin:375 is not listed on IDEAS
  21. Gordon H. Hanson & Ann Harrison, 1999. "Trade liberalization and wage inequality in Mexico," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(2), pages 271-288, January.
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