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Trade liberalization and the evolution of skill earnings differentials in Brazil

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Author Info
Gustavo Gonzaga () (Department of Economics PUC-Rio)
Naércio Menezes Filho (IBMEC-SP and USP)
Maria Cristina Terra (EPGE/FGV)

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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 tariffs, prices, earnings, 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) tari¤ 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 was even larger than the observed one. The results are compatible with trade liberalization accounting for the observed relative earnings changes in Brazil. They also highlight the importance of considering the effects of differentiated pass-through from tariffs to prices.

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Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 503.

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Length: 39p
Date of creation: Aug 2005
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Publication status: Published in Journal of International Economics, 68(2): 345-367, 2006
Handle: RePEc:rio:texdis:503

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  4. Jere R. Behrman & Nancy Birdsall & Miguel Székely, 2003. "Economic Policy and Wage Differentials in Latin America," Working Papers 29, Center for Global Development. [Downloadable!]
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  6. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1169-1213, November. [Downloadable!] (restricted)
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  7. Gordon H. Hanson & Ann Harrison, 1999. "Trade liberalization and wage inequality in Mexico," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 52(2), pages 271-288, January.
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  20. repec:fth:prinin:375 is not listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marc-Andreas Muendler, 2007. "Trade and Workforce Changeover in Brazil," University of California at San Diego, Economics Working Paper Series 2007-01, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
  2. Viviane Azevedo & Cesar Bouillon, 2009. "Social Mobility in Latin America: A Review of Existing Evidence," RES Working Papers 4634, Inter-American Development Bank, Research Department. [Downloadable!]
  3. Menezes Filho, N. A. & Giovannetti, Bruno, 2006. "Trade Liberalization and Demand for Skill in Brazil," Ibmec Working Papers wpe_55, Ibmec Working Paper, Ibmec São Paulo. [Downloadable!]
  4. Ferreira, Francisco H.G. & Leite, Phillippe G. & Wai-Poi, Matthew, 2007. "Trade Liberalization, Employment Flows and Wage Inequality in Brazil," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  5. Roberto Alvarez & Ricardo Lopez, 2008. "Skill Upgrading and the Real Exchange Rate," Caepr Working Papers 2008-020, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. [Downloadable!]
    Other versions:
  6. Bonomo, Marco Antônio Cesar & Terra, Maria Cristina T., 2005. "Special Interests and Political Business Cycles," Economics Working Papers (Ensaios Economicos da EPGE) 597, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  7. Raymond Robertson, 2006. "Globalization and Mexican labor markets," Proceedings, Federal Reserve Bank of Dallas, pages 61-80. [Downloadable!]
  8. Pedro S. Martins & Luiz A. Esteves, 2006. "Is There Rent Sharing In Developing Countries? Matched-Panel Evidence from Brazil," IZA Discussion Papers 2317, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. Menezes Filho, N. A. & Menezes Filho, N. A., 2007. "The Structure of Worker Compensation in Brazil, With a Comparison to France and the United States," Ibmec Working Papers wpe_76, Ibmec Working Paper, Ibmec São Paulo. [Downloadable!]
  10. Mariano Bosch & Edwin Goni & William Maloney, 2007. "The Determinants of Rising Informality in Brazil: Evidence from Gross Worker Flows," IZA Discussion Papers 2970, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Flôres Junior, Renato Galvão & Watanuki, Masakazu, 2006. "Integration Options for Mercosul - An Investigation Using the AMIDA Model," Economics Working Papers (Ensaios Economicos da EPGE) 610, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  12. Muriel, Beatriz & Terra, Maria Cristina T., 2007. "Sources of Comparative Advantages in Brazil," Economics Working Papers (Ensaios Economicos da EPGE) 658, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
    Other versions:
  13. Barbosa, Fernando de Holanda, 2005. "The Contagion Effect of Public Debt on Monetary Policy: The Brazilian Experience," Economics Working Papers (Ensaios Economicos da EPGE) 591, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  14. Ferreira, Francisco H. G. & Leite, Phillippe G. & Ravallion, Martin, 2007. "Poverty reduction without economic growth ? explaining Brazil's poverty dynamics, 1985-2004," Policy Research Working Paper Series 4431, The World Bank. [Downloadable!]
  15. Iulia Traistaru-Siedschlag & Christian Martincus, 2006. "Economic Integration and Manufacturing Concentration Patterns: Evidence from MERCOSUR," Open Economies Review, Springer, vol. 17(3), pages 297-319, July. [Downloadable!] (restricted)
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