IDEAS home Printed from
   My bibliography  Save this article

Wage Differentials: Trade Openness and Wage Bargaining


  • Gonzaga, Gustavo
  • Terra, Cristina
  • Muriel Hernandez, Beatriz


We build a theoretical model that incorporates unionization in thelabor market into a Heckscher-Ohlin-Samuelson (HOS) framework to in-vestigate the impact of unionization on the Stolper-Samuelson Theorem.To capture the American economy case, we assume that unskilled labor inthe manufactured goods sector is unionized, and that sector is intensivein skilled labor, and that trade liberalization increases the relative priceof manufactured goods. In the HOS model, trade liberalization inducesa reallocation of production towards the sector that uses intensively thecountry's most abundant factor. The resulting change in relative labor de-mand impacts wage bargaining in the unionized sector, which, in turn, hasa dampening eect on the Stolper-Samuelson eect. Moreover, wages ofunionized workers are even less responsive to trade liberalization. Throughtraditional mandated-wages regressions, we show that skilled-wage dier-entials changes were less pronounced among more unionized sectors in theU.S. economy for the 1979-1990 period.

Suggested Citation

  • Gonzaga, Gustavo & Terra, Cristina & Muriel Hernandez, Beatriz, 2014. "Wage Differentials: Trade Openness and Wage Bargaining," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 34(1), March.
  • Handle: RePEc:sbe:breart:v:34:y:2014:i:1:a:20485

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    4. Ian M. McDonald & Robert M. Solow, 1985. "Wages and Employment in a Segmented Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1115-1141.
    5. Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Have Falling Tariffs and Transportation Costs Raised US Wage Inequality?," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 630-650, September.
    6. Sucharita Ghosh & Steven Yamarik, 2007. "International Trade, Technology, and the Wage Gap: Evidence from Granger-causality Tests," Review of International Economics, Wiley Blackwell, vol. 15(2), pages 321-346, May.
    7. Nathalie Chusseau & Michel Dumont & Joël Hellier, 2008. "Explaining Rising Inequality: Skill-Biased Technical Change And North-South Trade ," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 409-457, July.
    8. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    9. Eliza, Nor & M., Azali & Law, Siong-Hook & Lee, Chin, 2008. "Demand For International Reserves in ASEAN-5 Economies," MPRA Paper 11735, University Library of Munich, Germany.
    10. Jonathan Haskel & Robert Z. Lawrence & Edward E. Leamer & Matthew J. Slaughter, 2012. "Globalization and U.S. Wages: Modifying Classic Theory to Explain Recent Facts," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 119-140, Spring.
    Full references (including those not matched with items on IDEAS)

    More about this item

    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
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects


    Access and download statistics


    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:sbe:breart:v:34:y:2014:i:1:a:20485. 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: (Núcleo de Computação da FGV/EPGE). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.