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Trade liberalisation and wages in South African manufacturing

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Author Info
Fiandeiro, M. Fatima
Rankin, Neil A.

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Abstract

There is a popular perception that recent trade liberalisation in South Africa has been bad for jobs. This paper examines this by investigating the relationship between tariffs, both levels and changes, and wages in the manufacturing sector. This is done through matching individual labour force data with industry level tariff data and estimating Mincerian earnings equations. The results suggest that an identical individual in a low tariff sector earns more than one in a high tariff sector. Furthermore, wages are higher in those sectors that have undergone greater liberalisation. These results are robust to controlling for sector characteristics as well as selectivity into manufacturing jobs. Contrary to popular perception, these results suggest that trade liberalisation is good for wages. Two possible explanations of this positive relationship are investigated. The first is that trade liberalisation has resulted in low wage job shedding in those sectors that have liberalised. There is some evidence that this is occurring. The second is that wages in liberalising sectors have risen relative to sectors where tariffs have remained the same – the evidence provided suggests that this may also be an explanation.

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File URL: http://mpra.ub.uni-muenchen.de/17066/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17066.

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Date of creation: Feb 2008
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Handle: RePEc:pra:mprapa:17066

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Related research
Keywords: Trade liberalisation; wages; South Africa;

Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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  1. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
  2. J. Paul Dunne & Lawrence Edwards, 2006. "Trade Technology and Employment: A case Study of South Africa," Discussion Papers 0602, University of the West of England, Department of Economics. [Downloadable!]
  3. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March. [Downloadable!] (restricted)
  4. François Bourguignon & Martin Fournier & Marc Gurgand, 2004. "Selection Bias Corrections Based on the Multinomial Logit Model: Monte-Carlo Comparisons," DELTA Working Papers 2004-20, DELTA (Ecole normale supérieure). [Downloadable!]
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