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Wage structure effects of international trade in a small open economy: the case of Belgium

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  • Philip Du Caju
  • François Rycx
  • Ilan Tojerow

Abstract

This paper investigates the impact of international trade on wage dispersion in a small open economy, Belgium. It is one of the few to: (i) use detailed, matched employer-employee data to compute industry wage premia and disaggregated industry-level panel data to examine the impact of changes in international trade on changes in wage differentials, (ii) simultaneously analyse both imports and exports, and (iii) examine the impact of imports according to the country of origin. Looking at the export side, we find (on the basis of the system generalized method of moments estimator) a positive effect of exports on industry wage premia. The results also show that import penetration has a significant and negative impact on industry wage differentials. However, the detrimental effect of imports on wages is found to be significantly greater when imports originate from low and middle-income countries than from high-income countries. © 2012 Kiel Institute.
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  • 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.
    • Handle: RePEc:spr:weltar:v:148:y:2012:i:2:p:297-331
    DOI: 10.1007/s10290-012-0121-6
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    Keywords

    Wage structure; Inter-industry wage differentials; International trade; Matched employer-employee data; F16; J31;
    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

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