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Gender Wage Discrimination and Trade Openness

  • Sarra Ben Yahmed

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS.)

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    International trade has been expected to reduce the gender wage gap by increasing competition and thus reducing the rents that allow employers to discriminate. However, some empirical assessments find an opposite effect. We provide an explanation for the puzzling result that trade openness widens the gender wage gap under certain circumstances. This paper introduces employer taste discrimination in an open economy model with imperfect competition to shed light on the heterogeneous impacts of openness on the gender wage gap. Firms operate in an oligopoly where and prejudiced employers can use their rents to pay men a premium, in line with Becker’s theory. Penetration of foreign products in the domestic market triggers a surge in competition thus heightening incentives to reduce costs differences which reduces the wage gap. However, an easier access to foreign markets is an opportunity for domestic firms to enhance profits. The model determines under which conditions new export opportunities enable discriminatory firms to maintain their discretionary expenditures. The theoretical predictions are confronted with data for Uruguayan manufacturing sectors that experienced a sharp liberalization of trade in the 1990s. Market access of Uruguayan firms as well as competitors’ access to the Uruguayan market, computed at the industry level, are used for the first time to assess the impact of trade openness on the gender wage gap in a specification inspired by the theory.

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    File URL: http://www.amse-aixmarseille.fr/sites/default/files/_dt/2012/wp_2012_-_nr_33.pdf
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    Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1233.

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    Length: 44 pages
    Date of creation: Nov 2012
    Date of revision:
    Handle: RePEc:aim:wpaimx:1233
    Contact details of provider: Web page: http://www.amse-aixmarseille.fr/en

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    1. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
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    11. Weber, Andrea & Zulehner, Christine, 2009. "Competition and Gender Prejudice: Are Discriminatory Employers Doomed to Fail?," IZA Discussion Papers 4526, Institute for the Study of Labor (IZA).
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    13. Laura Hering & Sandra Poncet, 2010. "Market Access and Individual Wages: Evidence from China," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 145-159, February.
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    15. Menon, Nidhiya & Rodgers, Yana van der Meulen, 2009. "International Trade and the Gender Wage Gap: New Evidence from India's Manufacturing Sector," World Development, Elsevier, vol. 37(5), pages 965-981, May.
    16. G¸nseli Berik & Yana van der Meulen Rodgers & Joseph E. Zveglich, 2004. "International Trade and Gender Wage Discrimination: Evidence from East Asia," Review of Development Economics, Wiley Blackwell, vol. 8(2), pages 237-254, 05.
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