IDEAS home Printed from https://ideas.repec.org/a/lje/journl/v14y2009i1p1-37.html
   My bibliography  Save this article

Trade Liberalization and the Lead Role of Human Capital and Job Attributes in Wage Determination: The Case of Pakistan’s Labor Market

Author

Listed:
  • Bushra Yasmin

    (Department of Economics, Fatima Jinnah Women University, Rawalpindi, Pakistan.)

Abstract

This study analyzes the role of human capital and job attributes, i.e., supply-side determinants, in determining wages in a period of trade liberalization. Using the Mincerian earning function and based on data from the Labor Force Surveys, we construct a model to estimate various wage determinants and compute the rates of return to different educational qualifications and relative occupational wage shares for the years 2005/06 and 1990/91. The estimated earning functions for 1990/91 and 2005/06 are compared to investigate whether individual characteristics—such as gender, job location, nature of job, educational qualifications, and different occupations—cause the wage gap to widen or contract under conditions of trade liberalization. The mean and quantile regression approach is used for estimation purposes. Our key findings postulate (i) an increasing gender pay gap, (ii) a higher wage premium to the highest educational qualification, and (iii) more or less stable relative wages for different occupations over time. In addition, wage dispersion across occupational groups appears more pronounced in 1990/91 than in 2005/06, implying a declining trend in the difference in wage distribution across occupations. Our findings suggest that trade liberalization cannot be presumed to pose a threat to the labor market in the wage context. However, exposing labor to an open market has not increased the productivity and skills of labor or helped reap the potential benefits of trade liberalization.

Suggested Citation

  • Bushra Yasmin, 2009. "Trade Liberalization and the Lead Role of Human Capital and Job Attributes in Wage Determination: The Case of Pakistan’s Labor Market," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 14(1), pages 1-37, Jan-Jun.
    • Handle: RePEc:lje:journl:v:14:y:2009:i:1:p:1-37
    as

    Download full text from publisher

    File URL: http://121.52.153.179/JOURNAL/LJE_VOL-14-1%20PDF%20Final%20Printed/1_Bushra_Yasmin.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robbins, Donald & Gindling, T H, 1999. "Trade Liberalization and the Relative Wages for More-Skilled Workers in Costa Rica," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 140-154, June.
    2. Alan B. Krueger, 1988. "The Determinants of Queues for Federal Jobs," ILR Review, Cornell University, ILR School, vol. 41(4), pages 567-581, July.
    3. Terrell, Katherine, 1993. "Public-private wage differentials in Haiti Do public servants earn a rent?," Journal of Development Economics, Elsevier, vol. 42(2), pages 293-314, December.
    4. Gordon H. Hanson & Ann Harrison, 2022. "Trade Liberalization And Wage Inequality In Mexico," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 3, pages 43-60, World Scientific Publishing Co. Pte. Ltd..
    5. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages 73-96, February.
    6. Greenaway, David & Hine, Robert C. & Wright, Peter, 1999. "An empirical assessment of the impact of trade on employment in the United Kingdom," European Journal of Political Economy, Elsevier, vol. 15(3), pages 485-500, September.
    7. Sébastien Jean & Giuseppe Nicoletti, 2015. "Product market regulation and wage premia in Europe and North America: An empirical investigation," International Economics, CEPII research center, issue 144, pages 1-28.
    8. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    9. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    10. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," The World Bank Economic Review, World Bank, vol. 11(1), pages 33-57, January.
    11. A. R. Kemal, 2005. "Skill Development in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 349-357.
    12. Keeley, Michael C, 1977. "The Economics of Family Formation," Economic Inquiry, Western Economic Association International, vol. 15(2), pages 238-250, April.
    13. Krueger, Anne O., 1990. "Perspectives on Trade and Development," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226454900, September.
    14. Puja Vasudeva Dutta, 2004. "Trade Protection and Inter-industry Wages in India," PRUS Working Papers 27, Poverty Research Unit at Sussex, University of Sussex.
    15. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    16. Puja Vasudeva Dutta, 2007. "Trade Protection and Industry Wages in India," ILR Review, Cornell University, ILR School, vol. 60(2), pages 268-286, January.
    17. Green, Francis & Dickerson, Andy & Saba Arbache, Jorge, 2001. "A Picture of Wage Inequality and the Allocation of Labor Through a Period of Trade Liberalization: The Case of Brazil," World Development, Elsevier, vol. 29(11), pages 1923-1939, November.
    18. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    19. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    20. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-1393, September.
    21. Kenny, Lawrence W, 1983. "The Accumulation of Human Capital during Marriage by Males," Economic Inquiry, Western Economic Association International, vol. 21(2), pages 223-231, April.
    22. Amjad, Rashid, 1984. "The management of Pakistan's economy 1947-82," MPRA Paper 35850, University Library of Munich, Germany.
    23. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
    24. Sébastien Jean & Giuseppe Nicoletti, 2004. "Regulation and Wage Premia," Working Papers 2004-12, CEPII research center.
    25. A.R. Kemal, 1998. "Industrial Development In Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 14, pages 107-119.
    26. Zadia M. Feliciano, 2001. "Workers and Trade Liberalization: The Impact of Trade Reforms in Mexico on Wages and Employment," ILR Review, Cornell University, ILR School, vol. 55(1), pages 95-115, October.
    27. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
    28. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, January.
    29. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    30. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, March.
    31. Gindling, T H, 1991. "Labor Market Segmentation and the Determination of Wages in the Public, Private-Formal, and Informal Sectors in San Jose, Costa Rica," Economic Development and Cultural Change, University of Chicago Press, vol. 39(3), pages 584-605, April.
    32. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June.
    33. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-318, May.
    34. Asma Hyder & Barry Reilly, 2005. "The Public and Private Sector Pay Gap in Pakistan: A Quantile Regression Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(3), pages 271-306.
    35. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-433, June.
    36. Jacob Mincer & Haim Ofek, 1982. "Interrupted Work Careers: Depreciation and Restoration of Human Capital," Journal of Human Resources, University of Wisconsin Press, vol. 17(1), pages 3-24.
    37. Donald J. Robbins, 1996. "Evidence on Trade and Wages in the Developing World," OECD Development Centre Working Papers 119, OECD Publishing.
    38. Noel Gaston & Daniel Trefler, 1994. "Protection, Trade, and Wages: Evidence from U.S. Manufacturing," ILR Review, Cornell University, ILR School, vol. 47(4), pages 574-593, July.
    39. Baldwin,Richard & Cohen,Daniel & Sapir,Andre & Venables,Anthony (ed.), 1999. "Market Integration, Regionalism and the Global Economy," Cambridge Books, Cambridge University Press, number 9780521645898.
    40. Jacob Mincer, 1962. "On-the-Job Training: Costs, Returns, and Some Implications," NBER Chapters, in: Investment in Human Beings, pages 50-79, National Bureau of Economic Research, Inc.
    41. Robbins, Donald J., 1996. "Hos Hits Facts: Facts Win Evidence On Trade And Wages In The Developing World," Harvard Institute for International Development (HIID) Papers 294374, Harvard University, Kennedy School of Government.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Seneviratne, Prathi, 2020. "Gender wage inequality during Sri Lanka’s post-reform growth: A distributional analysis," World Development, Elsevier, vol. 129(C).
    2. Casal, María del Pilar & Barham, Bradford L., 2013. "Motherhood wage penalties and labour market segmentation: Evidence from Argentina," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    3. Sohail Chand & Nuzhat Aftab, 2018. "Modified Variance Ratio Test for Autocorrelation in the Presence of Heteroskedasticity," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 23(1), pages 1-19, Jan-June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    2. Puja Vasudeva Dutta, 2004. "Trade Protection and Inter-industry Wages in India," PRUS Working Papers 27, Poverty Research Unit at Sussex, University of Sussex.
    3. Jorge Saba Arbache, 2004. "Do Structural Reforms always Succeed?: Lessons from Brazil," WIDER Working Paper Series RP2004-58, World Institute for Development Economic Research (UNU-WIDER).
    4. Philip Du Caju & François Rycx & Ilan Tojerow, 2011. "Wage Structure Effects of International Trade: Evidence from a Small Open Economy," Working Papers CEB 11-011, ULB -- Universite Libre de Bruxelles.
    5. Philip Du Caju & François Rycx & Ilan Tojerow, 2012. "Wage structure effects of international trade in a small open economy: the case of Belgium," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 297-331, June.
    6. Nathalie Chusseau & Joël Hellier, 2013. "Inequality in Emerging Countries," Palgrave Macmillan Books, in: Joël Hellier & Nathalie Chusseau (ed.), Growing Income Inequalities, chapter 2, pages 48-75, Palgrave Macmillan.
    7. Chahir Zaki, 2011. "On Trade Policies and Wage Disparity in Egypt: Evidence from Microeconomic Data," Working Papers 606, Economic Research Forum, revised 08 Jan 2011.
    8. Julien Gourdon, 2011. "Wage inequality in developing countries: South–South trade matters," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 58(4), pages 359-383, December.
    9. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
    10. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    11. Zouhair Mrabet, 2012. "The Impact of Trade Liberalization on Labor Market of Developing Countries: What can Literature tell us?," Journal of Economics and Behavioral Studies, AMH International, vol. 4(6), pages 307-318.
    12. Anderson, Edward, 2005. "Openness and inequality in developing countries: A review of theory and recent evidence," World Development, Elsevier, vol. 33(7), pages 1045-1063, July.
    13. Elżbieta Stępień, 2009. "The Impact of International Trade and Foreign Competition on Labour Earnings in Poland," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 24.
    14. Aysit Tansel & Elif Oznur Acar, 2016. "The Formal/Informal Employment Earnings Gap: Evidence from Turkey," Research on Economic Inequality, in: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting, volume 24, pages 121-154, Emerald Group Publishing Limited.
    15. Vélez, Carlos Eduardo & Leibovich, Jose & Kugler, Adriana & Bouillón, Cesar & Núñez, Jairo, 2001. "The Reversal of Inequality Trends in Colombia, 1978-1995: A Combination of Persistent and Fluctuating Forces," MPRA Paper 69701, University Library of Munich, Germany.
    16. Green, Francis & Dickerson, Andy & Saba Arbache, Jorge, 2001. "A Picture of Wage Inequality and the Allocation of Labor Through a Period of Trade Liberalization: The Case of Brazil," World Development, Elsevier, vol. 29(11), pages 1923-1939, November.
    17. Puja Vasudeva Dutta, 2005. "Accounting for Wage Inequality in India," PRUS Working Papers 29, Poverty Research Unit at Sussex, University of Sussex.
    18. Günalp, Burak & Cilasun, Seyit Mümin & Acar, Elif Öznur, 2013. "Male-Female Labor Market Participation and the Extent of Gender-Based Wage Discrimination in Turkey," MPRA Paper 51503, University Library of Munich, Germany.
    19. Aysit Tansel & Fatma Bircan Bodur, 2012. "Wage Inequality and Returns to Education in Turkey: A Quantile Regression Analysis," Review of Development Economics, Wiley Blackwell, vol. 16(1), pages 107-121, February.
    20. Bushra Yasmin & Aliya H. Khan, 2011. "Trade Openness: New Evidence for Labor-Demand Elasticity in Pakistan's Manufacturing Sector," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(2), pages 55-85, Jul-Dec.

    More about this item

    Keywords

    Trade liberalization; wage determination; human capital; Pakistan.;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lje:journl:v:14:y:2009:i:1:p:1-37. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Shahid Salahuddin (email available below). General contact details of provider: https://edirc.repec.org/data/lsecopk.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.