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Gender Wage Discrimination and Trade Openness. Prejudiced employers in an open industry

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  • Sarra Ben Yahmed

    () (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)

Abstract

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.

Suggested Citation

  • Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness. Prejudiced employers in an open industry," Working Papers halshs-00793561, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00793561
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00793561
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    References listed on IDEAS

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    1. J. Peter Neary, 2003. "Competitive versus Comparative Advantage," The World Economy, Wiley Blackwell, vol. 26(4), pages 457-470, April.
    2. Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 680-693, November.
    3. 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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    5. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January.
    6. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    7. 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, May.
    8. Sandra E. Black & Philip E. Strahan, 2001. "The Division of Spoils: Rent-Sharing and Discrimination in a Regulated Industry," American Economic Review, American Economic Association, vol. 91(4), pages 814-831, September.
    9. Fally, Thibault & Paillacar, Rodrigo & Terra, Cristina, 2010. "Economic geography and wages in Brazil: Evidence from micro-data," Journal of Development Economics, Elsevier, vol. 91(1), pages 155-168, January.
    10. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
    11. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    12. Mayer, Thierry & Paillacar, Rodrigo & Zignago, Soledad, 2008. "TradeProd. The CEPII Trade, Production and Bilateral Protection Database: Explanatory Notes," MPRA Paper 26477, University Library of Munich, Germany.
    13. 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.
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    Citations

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    Cited by:

    1. Sarra Ben Yahmed, 2012. "Gender Wage Gaps across Skills and Trade Openness," AMSE Working Papers 1232, Aix-Marseille School of Economics, Marseille, France, revised Nov 2012.
    2. Pamela Bombarda & Sarra Ben Yahmed, 2017. "Gender, Informal Employment and Trade Liberalization in Mexico," THEMA Working Papers 2017-03, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    3. Sarra Ben Yahmed, 2012. "Gender Wage Gaps across Skills and Trade Openness," Working Papers halshs-00793559, HAL.

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