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Does Openness Reduce Wage Inequality In Developing Countries? Panel Data Evidence From Bangladesh

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  • FARZANA MUNSHI

    (Department of Economics and Social Sciences, BRAC University, 66 Mohakhali, Dhaka 1212, Bangladesh, Bangladesh)

Abstract

This paper provides panel data evidence on trade liberalization and wage inequality in Bangladesh. Estimates from a dynamic model for five major manufacturing industries spanning the 1975–2002 period suggest that the effect of increased openness to trade is associated with a decrease in wage inequality. The result is in line with the theoretical prediction in that greater openness is expected to reduce wage inequality in developing countries.

Suggested Citation

  • Farzana Munshi, 2012. "Does Openness Reduce Wage Inequality In Developing Countries? Panel Data Evidence From Bangladesh," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 57(02), pages 1-12.
    • Handle: RePEc:wsi:serxxx:v:57:y:2012:i:02:n:s0217590812500129
    DOI: 10.1142/S0217590812500129
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    References listed on IDEAS

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    1. Breitung, J. & Pesaran, M.H., 2005. "Unit Roots and Cointegration in Panels," Cambridge Working Papers in Economics 0535, Faculty of Economics, University of Cambridge.
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    5. Durevall, Dick & Munshi, Farzana, 2006. "Trade Liberalization and Wage Inequality: Empirical Evidence from Bangladesh," Working Papers in Economics 205, University of Gothenburg, Department of Economics.
    6. Utsav Kumar & Prachi Mishra, 2008. "Trade Liberalization and Wage Inequality: Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 291-311, May.
    7. Debapriya Bhattacharya & Mustafizur Rahman & Ananya Raihan, 2002. "Contribution of the RMG Sector to the Bangladesh Economy," CPD Working Paper 50, Centre for Policy Dialogue (CPD).
    8. Utsav Kumar & Prachi Mishra, 2008. "Trade Liberalization and Wage Inequality: Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 291-311, May.
    9. 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.
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    Cited by:

    1. Lim, G.C. & McNelis, Paul D., 2016. "Income growth and inequality: The threshold effects of trade and financial openness," Economic Modelling, Elsevier, vol. 58(C), pages 403-412.
    2. Ribeiro, Ana Paula & Carvalho, Vitor & Ferreira, Mariana, 2020. "The effect of globalization on wage inequality: an application to the European Union before the Great Recession," MPRA Paper 110697, University Library of Munich, Germany.

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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