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Trade Liberalisation Does Not Always Raise Wage Premia: Evidence from Ugandan Districts

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  • Massimiliano Calì

Abstract

The process of economic integration over the past two decades has been accompanied by an expanding income wedge between skilled and unskilled workers in many developing countries. This was also the case for Ugandan wage employees during the 1990s, which was a period of abrupt trade opening and market reforms. This is a surprising result for an unskilled labour abundant country like Uganda in light of a standard Heckscher-Ohlin (H-O) framework. But was the trade opening responsible for the increase in wage premia? By using a novel district-level analysis, I find that in fact increased trade reduced the returns to schooling in line with the H-O predictions. On the other hand, the intensification of domestic trade across districts during the period was associated with higher returns in those districts relatively endowed with skilled employees. This effect appears to be responsible for at least some of the rising returns to schooling among wage employees in Uganda.

Suggested Citation

  • Massimiliano Calì, 2012. "Trade Liberalisation Does Not Always Raise Wage Premia: Evidence from Ugandan Districts," SERC Discussion Papers 0114, Spatial Economics Research Centre, LSE.
    • Handle: RePEc:cep:sercdp:0114
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    Keywords

    Returns to education; wage inequality; Uganda; trade; market reforms;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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