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International trade and wage inequality: A non-monotonic relationship

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  • Liu, Dan

Abstract

In this paper, I empirically examine the non-monotonic relationship between openness and within-group wage inequality predicted by Helpman et al. (2010) using a panel data for the US, 1983–2005. Within-group wage inequality is measured for each industry and matched with exports. It can be shown that after controlling for year fixed effects, industry fixed effects and labor compositions, within-group wage inequality first increases with the degree of openness and then decreases. The average turning point, measured by the ratio of exports to domestic sales, is around 0.3–0.35. The results are robust to various measures of within-group wage inequality.

Suggested Citation

  • Liu, Dan, 2013. "International trade and wage inequality: A non-monotonic relationship," Economics Letters, Elsevier, vol. 121(2), pages 244-246.
    • Handle: RePEc:eee:ecolet:v:121:y:2013:i:2:p:244-246
    DOI: 10.1016/j.econlet.2013.08.019
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    References listed on IDEAS

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    1. Amiti, Mary & Cameron, Lisa, 2012. "Trade Liberalization and the Wage Skill Premium: Evidence from Indonesia," Journal of International Economics, Elsevier, vol. 87(2), pages 277-287.
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    3. repec:oup:restud:v:84:y::i:1:p:357-405. is not listed on IDEAS
    4. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
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    8. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
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    Cited by:

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    2. Petit, Sylvain, 2016. "International trade in services and inequalities: Empirical evaluation and role of tourism services," MPRA Paper 75206, University Library of Munich, Germany.
    3. L. Alan Winters & Antonio Martuscelli, 2014. "Trade Liberalization and Poverty: What Have We Learned in a Decade?," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 493-512, October.

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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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