Trends in Tariff Reforms and Trends in the Structure of Wages
This paper provides new evidence on the impacts of trade reforms on wages. We first introduce a model of trade that combines a non-competitive wage setting mechanism due to unions with a factor abundance hypothesis. The predictions of the model are then econometrically investigated using Argentine data. Instead of achieving identification by comparing industrial wages before and after one episode of trade liberalization, our strategy exploits the recent historical record of policy changes adopted by Argentina: from significant protection in the early 1970s, to the first episode of liberalization during the late 1970s, then back to a slowdown of reforms during the 1980s, and finally to the second episode of liberalization in the 1990s. These swings in trade policy represent broken trends in trade reforms that we can compare with observed trends in wages and wage inequality. We use unusual historical data sets of trends in tariffs, wages, and wage inequality to examine the structure of wages in Argentina and to explore how it is affected by tariff reforms. We find that i) trade liberalization, ceteris paribus, reduces wages; ii) industry tariffs reduce the industry skill premium; iii) conditional on the structure of tariffs at the industry level, the average tariff in the economy is positively associated with the aggregate skill premium. These findings suggest that the observed trends in wage inequality in Latin America can be reconciled with the Stolper-Samuelson predictions in a model with unions.
|Date of creation:||Oct 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Calle 48 No555 - La Plata (1900)|
Phone: 21- 1466
Web page: http://cedlas.econo.unlp.edu.ar/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ann Harrison & Gordon Hanson, 1999.
"Who Gains from Trade Reform? Some Remaining Puzzles,"
NBER Working Papers
6915, National Bureau of Economic Research, Inc.
- Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June.
- Robert Gibbons & Lawrence Katz, 1992.
"Does Unmeasured Ability Explain Inter-Industry Wage Differentials?,"
Review of Economic Studies,
Oxford University Press, vol. 59(3), pages 515-535.
- Robert Gibbons & Lawrence F. Katz, 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
- Noel Gaston & Daniel Trefler, 1994. "Protection, Trade, and Wages: Evidence from U.S. Manufacturing," ILR Review, Cornell University, ILR School, vol. 47(4), pages 574-593, July.
- Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009.
"Estimating Trade Restrictiveness Indices,"
Royal Economic Society, vol. 119(534), pages 172-199, 01.
- Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating Trade Restrictiveness Indices," CEPR Discussion Papers 5576, C.E.P.R. Discussion Papers.
- Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank.
- Manoj Atolia, 2002.
"Trade Liberalization and Rising Wage Inequality in Latin America: Reconciliation with HOS Theory,"
wp2002_03_01, Department of Economics, Florida State University, revised Feb 2006.
- Atolia, Manoj, 2007. "Trade liberalization and rising wage inequality in Latin America: Reconciliation with HOS theory," Journal of International Economics, Elsevier, vol. 71(2), pages 467-494, April.
- Orazio Attanasio & Pinelopi Goldberg & Nina Pavcnik, 2003.
"Trade Reforms and Wage Inequiality in Colombia,"
NBER Working Papers
9830, National Bureau of Economic Research, Inc.
- Gaston, Noel & Trefler, Daniel, 1995. "Union wage sensitivity to trade and protection: Theory and evidence," Journal of International Economics, Elsevier, vol. 39(1-2), pages 1-25, August.
- Pavcnik, Nina, 2003.
"What explains skill upgrading in less developed countries?,"
Journal of Development Economics,
Elsevier, vol. 71(2), pages 311-328, August.
- Nina Pavcnik, 2000. "What Explains Skill Upgrading in Less Developed Countries?," NBER Working Papers 7846, National Bureau of Economic Research, Inc.
- Galiani, Sebastian & Sanguinetti, Pablo, 2003.
"The impact of trade liberalization on wage inequality: evidence from Argentina,"
Journal of Development Economics,
Elsevier, vol. 72(2), pages 497-513, December.
- Sebastian Galiani & Pablo Sanguinetti, 2003. "The Impact of Trade Liberalization on Wage Inequality: Evidence from Argentina," Working Papers 65, Universidad de San Andres, Departamento de Economia, revised Oct 2003.
- Pabo Sanguinetti & Sebastian Galiani, 2003. "The impact of trade liberalizationon wage inequality:Evidence from Argentina," Department of Economics Working Papers 011, Universidad Torcuato Di Tella.
- Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
- William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
- Thorsten Vogel, 2007. "Union Wage Compression in a Right-to-Manage Model," SFB 649 Discussion Papers SFB649DP2007-009, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Currie, Janet & Harrison, Ann E, 1997. "Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S44-71, July.
- David Card & Thomas Lemieux & W. Craig Riddell, 2003. "Unionization and Wage Inequality: A Comparative Study of the U.S, the U.K., and Canada," NBER Working Papers 9473, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:dls:wpaper:0124. 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: (Ana Pacheco)
If references are entirely missing, you can add them using this form.