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Trade, Technology and Wage Inequality in the South African Manufacturing Sectors

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  • Johannes Fedderke
  • Yongcheol Shin

    ()

Abstract

This paper advances on previous work on the effects of trade and technical change on labour markets within the framework of Heckscher-Ohlin trade theory. First, we employ dynamic heterogeneous panel estimation techniques not previously used in this context, which separate Heckscher-Ohlin-based long run relationships from short run dynamics that are heterogeneous across sectors. Second, we provide evidence for an unskilled labor abundant developing country that allows comparison of the results against developed country evidence. Third, we consider the appropriateness of alternative approaches and examine endogeneity issues in the impact of technology and price changes on factor returns. For South African manufacturing we find that output prices increase most strongly in sectors that are labor intensive. Our results further suggest that trade-mandated earnings increases are positive for labor, and negative for capital. By contrast technology has mandated negative earnings increases for both factors. We also find that separation of different demand side factors collectively constituting globalization is useful in understanding the impact of trade, and taking account of endogeneity is important in isolating factor and sector bias of technological change.

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Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 106.

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Length: 31
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:edn:esedps:106

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Related research

Keywords: Trade; Total Factor Productivity; Stolper-Samuelson Theorem; Mandated Factor Earnings Changes; Dynamic Heterogeneous Panel Data; Pooled Mean Group Estimation.;

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References

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Citations

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Cited by:
  1. Hildegunn Ekroll Stokke & Jørn Rattsø, 2004. "Ramsey model of barriers to growth and skill-biased income distribution in South Africa," Working Paper Series 4604, Department of Economics, Norwegian University of Science and Technology, revised 07 Feb 2005.
  2. Thurlow, James, 2006. "Has trade liberalization in South Africa affected men and women differently?:," DSGD discussion papers 36, International Food Policy Research Institute (IFPRI).
  3. Rattsø, Jørn & Stokke, Hildegunn, 2009. "Wage inequality, comparative advantage and skill biased technical change in South Africa," Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 34, Verein für Socialpolitik, Research Committee Development Economics.
  4. George Clarke & James Habyarimana & David Kaplan & Vijaya Ramachandran, 2008. "Why isn't South Africa growing faster? Microeconomic evidence from a firm survey," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(7), pages 837-868.

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