Advanced Search
MyIDEAS: Login

Trade Shocks in Brazil: An Investigation of Effects on Regional Manufacturing Wages

Contents:

Author Info

  • Filipe Lage-De-Sousa

    ()

Registered author(s):

    Abstract

    Brazil has experienced two trade shocks in the 90’s: unilateral liberalization, which weighted average nominal tariff reduced from 37.7% in 1988 to 10.2% in 1994; drastically real devaluation of 47% in the exchange rate in 1999. These two effects has influenced the location of industry in Brazil, since the industry center of Brazil, Sao Paulo State, reduced its participation in the industry sector from 52% in 1985 to 43% in 2002. This occurs when the dispersion forces overcome the agglomeration ones. The main dispersion force evidenced by the literature is the increase of competition, not only in the goods market (a new product), but also in the factor market (demand of labor, which increases wages). In a trade agreement, the most common trade shock, these two forces occurred simultaneously. At this case, it is possible to distinguish between two dispersion forces: competition of the imported goods (first shock); competition in the labor market (second shock). One way to evaluate these effects can be by investigating the effectiveness of transport cost to understand the regional differences in wages and if it has reduced (or increased) its explanation power after the trade shock. In order to do that, the methodology of Hanson 1997 will be used as a basic framework. It is possible to analyze the effects of these trade shocks in the disparities of regional wages in Brazil with his methodology. However, there will be some differences to his framework. First, Hanson uses state level data and this paper has a more disaggregated regional data (microregion, which divides Brazil into more than 500 parts). Second, Hanson doesn’t take into account any change in educational level, infrastructure improvement or government intervention, which are considered in this investigation. The first results show that transport cost is important to understand differences in wages between Brazilian microregions and trade shocks have influenced in some sense these disparities, but not so consistently as transport costs. Moreover, it seems that dispersion force of the second shock was greater than the first one, therefore, competition to hire new employees expel more plants to lower wages regions than comptetion with new products.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa06/papers/441.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa06p441.

    as in new window
    Length:
    Date of creation: Aug 2006
    Date of revision:
    Handle: RePEc:wiw:wiwrsa:ersa06p441

    Contact details of provider:
    Postal: Welthandelsplatz 1, 1020 Vienna, Austria
    Web page: http://www.ersa.org

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Hanson, Gordon H, 1996. "Localization Economies, Vertical Organization, and Trade," American Economic Review, American Economic Association, vol. 86(5), pages 1266-78, December.
    2. Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
    3. Henry G. Overman & L. Alan Winters, 2006. "Trade shocks and industrial location: the impact of EEC accession on the UK," LSE Research Online Documents on Economics 676, London School of Economics and Political Science, LSE Library.
    4. Rodríguez-Pose, Andrés & Arbixb, Glauco, 2000. "Strategies Of Waste: Bidding Wars In The Brazilian Automobile Sector," ERSA conference papers ersa00p505, European Regional Science Association.
    5. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January.
    6. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa06p441. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.