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Relative Factor Return Gaps in Labour Markets and Global Integration

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Mamoon, Dawood

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Abstract

We estimate the role of openness and integration in welfare generation in a cross country framework. Once controlling for institutions, openness is generally associated with increased wage inequalities across nations. However the results for trade policy are mixed. Decrease in import taxes increase wage inequality, whereas decrease in export taxes has an egalitarian effect. The results are applicable only to the larger sample of developed and developing countries. If the sample is restricted to developing countries, protection by means of export and import taxes is good for unskilled workers as higher trade taxes seem to put a downward pressure on the wage gaps between skilled and unskilled. The results highlight the bottle neck faced by both developing and developed countries in WTO talks which have not been successful as yet in terms of further decrease in trade taxes. In case this situation prevails, the paper calls for more South-South trade which would enable developing countries to decrease the relative wage gaps among their labour force.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3045.

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Date of creation: May 2007
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Handle: RePEc:pra:mprapa:3045

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Related research
Keywords: International Trade Redistribution Inequality Cross Section Models

Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

This paper has been announced in the following NEP Reports:

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  1. Milanovic, Branko, 2003. "The Two Faces of Globalization: Against Globalization as We Know It," World Development, Elsevier, vol. 31(4), pages 667-683, April. [Downloadable!] (restricted)
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  2. Jagdish Bhagwati & T. N. Srinivasan, 2002. "Trade and Poverty in the Poor Countries," American Economic Review, American Economic Association, vol. 92(2), pages 180-183, May. [Downloadable!]
  3. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-98, March. [Downloadable!] (restricted)
    Other versions:
  4. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December. [Downloadable!] (restricted)
    Other versions:
  5. Jeffrey A. Frankel & David Romer, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June. [Downloadable!] (restricted)
  6. Chong, Alberto & Gradstein, Mark, 2004. "Inequality and Institutions," CEPR Discussion Papers 4739, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, Oxford University Press, vol. 11(1), pages 33-57, January.
  8. Mamoon, D. & Murshed, S.M., 2005. "Are institutions more important than integration?," Working Papers - General Series 416, Institute of Social Studies. [Downloadable!]
  9. Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 133-162, January. [Downloadable!] (restricted)
  10. Alberto Chong & Mark Gradstein, 2004. "Inequality and Institutions," RES Working Papers 1045, Inter-American Development Bank, Research Department. [Downloadable!]
  11. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages F22-F49, 02. [Downloadable!] (restricted)
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