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Short‐term Consequences of Trade Reform for Industry Employment and Wages: Survey of Evidence from Colombia

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  • Pinelopi Koujianou Goldberg
  • Nina Pavcnik

Abstract

Recent research has focused on the short‐ to medium‐term implications of trade reforms for the labour market outcomes and poverty in poor economies. This article summarises the evidence on the short‐term consequences of the Colombian trade reform initiated in 1985 for industry employment and industry wages. Although the reform reduced manufacturing tariffs on average by 40 percentage points from 1984 to 1994, tariff declines were not significantly associated with labour reallocation across sectors. The reform, however, was associated with bigger declines in relative industry wages in sectors that experienced bigger tariff cuts. This evidence is in line with the predictions of short‐ to medium‐run models of trade in which labour is not mobile across sectors. It is also consistent with the predictions of models where imperfectly competitive industries share rents with workers and trade reduces the firms’ profit margins and thus workers’ rents.

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  • Pinelopi Koujianou Goldberg & Nina Pavcnik, 2005. "Short‐term Consequences of Trade Reform for Industry Employment and Wages: Survey of Evidence from Colombia," The World Economy, Wiley Blackwell, vol. 28(7), pages 923-939, July.
  • Handle: RePEc:bla:worlde:v:28:y:2005:i:7:p:923-939
    DOI: 10.1111/j.1467-9701.2005.00714.x
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    References listed on IDEAS

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    2. Lourenço S. Paz & Kul Prasad Kapri, 2019. "The Effects of the Chinese Imports on Brazilian Manufacturing Workers," Economies, MDPI, Open Access Journal, vol. 7(3), pages 1-22, August.
    3. Egger, Hartmut & Egger, Peter & Kreickemeier, Udo, 2013. "Trade, wages, and profits," European Economic Review, Elsevier, vol. 64(C), pages 332-350.
    4. Claire H. Hollweg & Daniel Lederman & Devashish Mitra, 2016. "Structural Reforms and Labour-market Outcomes: International Panel-data Evidence," The World Economy, Wiley Blackwell, vol. 39(7), pages 925-963, July.
    5. Iacovone, Leonardo & Rauch, Ferdinand & Winters, L. Alan, 2013. "Trade as an engine of creative destruction: Mexican experience with Chinese competition," Journal of International Economics, Elsevier, vol. 89(2), pages 379-392.
    6. Gnangnon, Sèna Kimm, 2020. "Development Aid, Remittances Inflows and Wages in the Manufacturing Sector of Recipient-Countries," EconStor Preprints 213439, ZBW - Leibniz Information Centre for Economics.
    7. Mendez, Oscar, 2015. "The effect of Chinese import competition on Mexican local labor markets," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 364-380.

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