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Trade liberalization, employment flows, and wage inequality in Brazil

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Author Info

  • Ferreira, Francisco H. G.
  • Leite, Phillippe G.
  • Wai-Poi, Matthew

Abstract

Using nationally representative, economywide data, this paper investigates the relative importance of trade-mandated effects on industry wage premia; industry and economywide skill premia; and employment flows in accounting for changes in the wage distribution in Brazil during the 1988-95 trade liberalization. Unlike in other Latin American countries, trade liberalization appears to have made a significant contribution toward a reduction in wage inequality. These effects have not occurred through changes in industry-specific (wage or skill) premia. Instead, they appear to have been channeled through substantial employment flows across sectors and formality categories. Changes in the economywide skill premium are also important.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4108.

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Date of creation: 01 Jan 2007
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Handle: RePEc:wbk:wbrwps:4108

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Keywords: Economic Theory&Research; Free Trade; Labor Markets; Trade Policy; Trade Law;

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References

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  1. Ravallion, Martin & Lokshin, Michael, 2004. "Gainers and losers from trade reform in Morocco," Policy Research Working Paper Series 3368, The World Bank.
  2. Francois Bourguignon & Francisco H. G. Ferreira & Nora Lusting, 2005. "The Microeconomics of Income Distribution Dynamics in East Asia and Latin America," World Bank Publications, The World Bank, number 14844, October.
  3. Pedro Cavalcanti Ferreira & JosÈ Luiz Rossi, 2003. "New Evidence from Brazil on Trade Liberalization and Productivity Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1383-1405, November.
  4. Linda S. Goldberg, 2004. "Industry-specific exchange rates for the United States," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 1-16.
  5. Verhoogen, Eric A., 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," CEPR Discussion Papers 6385, C.E.P.R. Discussion Papers.
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  7. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  8. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June.
  9. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc.
  10. Ravallion, Martin & Shaohua Chen, 2001. "Measuring pro-poor growth," Policy Research Working Paper Series 2666, The World Bank.
  11. Terra, Maria Cristina T. & Gonzaga, Gustavo & Menezes Filho, Naércio Aquino, 2002. "Trade Liberalization and the Evolution of Skill Earnings Differentials in Brazil," Economics Working Papers (Ensaios Economicos da EPGE) 457, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  12. Nina Pavcnik & Andreas Blom & Pinelopi Goldberg & Norbert Schady, 2004. "Trade Liberalization and Industry Wage Structure: Evidence from Brazil," World Bank Economic Review, World Bank Group, vol. 18(3), pages 319-344.
  13. Thoenig, Mathias & Verdier, Thierry, 2002. "A Theory of Defensive Skill-based Innovation and Globalization," CEPR Discussion Papers 3416, C.E.P.R. Discussion Papers.
  14. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
  15. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
  16. Reint Gropp & Liam P. Ebrill & Janet Gale Stotsky, 1999. "Revenue Implications of Trade Liberalization," IMF Occasional Papers 180, International Monetary Fund.
  17. Pinelopi K. Goldberg & Nina Pavcnik, 2001. "Trade Protection and Wages: Evidence from the Colombian Trade Reforms," NBER Working Papers 8575, National Bureau of Economic Research, Inc.
  18. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
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  20. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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Citations

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Cited by:
  1. Nora Lustig & Jaime Ros, 2011. "Latin America's Economic Challenges: Lessons for Emerging Economies," Working Papers 1112, Tulane University, Department of Economics.
  2. Leonardo Gasparini & Nora Lustig, 2011. "The Rise and Fall of Income Inequality in Latin America," Working Papers 1110, Tulane University, Department of Economics.
  3. Ponce, Juan & Vos, Rob, 2012. "Redistribution without Structural Change in Ecuador: Rising and Falling Income Inequality in the 1990s and 2000s," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. Viviane Azevedo & César P. Bouillon, 2009. "Social Mobility in Latin America: A Review of Existing Evidence," IDB Publications 6773, Inter-American Development Bank.
  5. Gerardo Esquivel, 2010. "The dynamics of income inequality in Mexico since NAFTA," Serie documentos de trabajo del Centro de Estudios Económicos 2010-09, El Colegio de México, Centro de Estudios Económicos.
  6. Ferreira, Francisco H.G. & Leite, Phillippe G. & Ravallion, Martin, 2010. "Poverty reduction without economic growth?: Explaining Brazil's poverty dynamics, 1985-2004," Journal of Development Economics, Elsevier, vol. 93(1), pages 20-36, September.
  7. Jayanthakumaran, Kankesu & Sangkaew, Piyapong & O’Brien, Martin, 2013. "Trade liberalisation and manufacturing wage premiums: Evidence from Thailand," Journal of Asian Economics, Elsevier, vol. 29(C), pages 15-23.
  8. Ferreira, Francisco H.G. & Ravallion, Martin, 2008. "Global poverty and inequality : a review of the evidence," Policy Research Working Paper Series 4623, The World Bank.
  9. Gasparini, Leonardo & Galiani, Sebastian & Cruces, Guillermo & Acosta, Pablo A., 2011. "Educational Upgrading and Returns to Skills in Latin America: Evidence from a Supply-Demand Framework, 1990-2010," IZA Discussion Papers 6244, Institute for the Study of Labor (IZA).
  10. Szekely, Miguel & Samano, Claudia, 2012. "Did Trade Openness Affect Income Distribution in Latin America? Evidence for the years 1980.2010," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  11. Francisco Ferreira, 2010. "Distributions in motion: Economic growth, inequality, and poverty dynamics," Working Papers 183, ECINEQ, Society for the Study of Economic Inequality.
  12. Flôres Junior, Renato Galvão, 2008. "Trade and Poverty in Latin American Countries: Conceptual and Methodological Challenges," Economics Working Papers (Ensaios Economicos da EPGE) 675, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  13. Nora Lustig & Luis F. Lopez-Calva & Eduardo Ortiz-Juarez, 2011. "The Decline in Inequality in Latin America: How Much, Since When and Why," Working Papers 1118, Tulane University, Department of Economics.

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