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Trade Liberalization and Wage Inequality: Empirical Evidence from Bangladesh

Author

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  • Durevall, Dick

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Munshi, Farzana

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

This paper explores the relationship between trade liberalization and skilled-unskilled wage inequality in the Bangladesh cotton textile industry. A dynamic two-equation model is estimated for wages of skilled and unskilled workers over the period 1973-2002, using four different openness measures. In no case does opening up affect unskilled wages differently than skilled wages, implying that openness per se has not contributed to changes in wage inequality. Our findings also suggest that openness increased real wages for both skilled and unskilled workers.

Suggested Citation

  • 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.
  • Handle: RePEc:hhs:gunwpe:0205
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    File URL: http://hdl.handle.net/2077/2709
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    References listed on IDEAS

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    1. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages 73-96, February.
    2. Galiani, Sebastian & Sanguinetti, Pablo, 2003. "The impact of trade liberalization on wage inequality: evidence from Argentina," Journal of Development Economics, Elsevier, pages 497-513.
    3. Bhaskar, V & Khan, Mushtaq, 1995. "Privatization and Employment: A Study of the Jute Industry in Bangladesh," American Economic Review, American Economic Association, pages 267-273.
    4. Koujianou Goldberg, Pinelopi & Pavcnik, Nina, 2003. "The response of the informal sector to trade liberalization," Journal of Development Economics, Elsevier, pages 463-496.
    5. Mohammad A. Hossain & Mohammad Alauddin, 2005. "Trade liberalization in Bangladesh: the process and its impact on macro variables particularly export expansion," Journal of Developing Areas, Tennessee State University, College of Business, vol. 39(1), pages 127-150, September.
    6. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
    7. Bhaskar, V & Khan, Mushtaq, 1995. "Privatization and Employment: A Study of the Jute Industry in Bangladesh," American Economic Review, American Economic Association, pages 267-273.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Munshi, Farzana, 2006. "Does openness reduce wage inequality in developing countries? A panel data analysis," Working Papers in Economics 241, University of Gothenburg, Department of Economics, revised 06 Feb 2008.
    2. Alam, Mohammad Jahangir & Bhuiyan, Nazmul & Begum, Ismat Ara & Van Huylenbroeck, Guido, 2012. "Tracing the Poverty Impact of Market Reforms in Bangladesh," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 123758, International Association of Agricultural Economists.
    3. Hashim, Danish & Banga, Rashmi, 2009. "Impact of Trade on Labour Productivity and Wage Inequality in India," MPRA Paper 35200, University Library of Munich, Germany.
    4. repec:dau:papers:123456789/12528 is not listed on IDEAS

    More about this item

    Keywords

    Bangladesh; cotton textile industry; openness; relative wages; trade liberalization; wage inequality;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • 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
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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