IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Wage Structure Effects of International Trade: Evidence from a Small Open Economy

  • Du Caju, Philip

    ()

    (National Bank of Belgium)

  • Rycx, Francois

    ()

    (Free University of Brussels)

  • Tojerow, Ilan

    ()

    (Free University of Brussels)

In the last decades, international trade has increased between industrialised countries and between high- and low-wage countries. This important change has raised questions on how international trade affects the labour market. In this spirit, this paper aims to investigate the impact of international trade on wage dispersion in a small open economy. It is one of the few to: i) use detailed matched employer-employee data to compute industry wage premia and disaggregated industry level panel data to examine the impact of changes in international trade on changes in wage differentials, ii) simultaneously analyse both imports and exports, and iii) examine the impact of imports according to the country of origin. Looking at the export side, we find (on the basis of the system GMM estimator) a positive effect of exports on industry wage premia. The results also show that import penetration has a significant and negative impact on industry wage differentials whatever the country of origin. However, the country of origin appears to matter quite a lot. Indeed, the detrimental effect of imports on wages is found to be significantly bigger when the latter come from low-income countries than from high-income countries.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.iza.org/dp5597.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5597.

as
in new window

Length: 33 pages
Date of creation: Mar 2011
Date of revision:
Publication status: published in: Review of World Economics, 2012, 14 (2), 297-331
Handle: RePEc:iza:izadps:dp5597
Contact details of provider: Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:


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.:

as in new window
  1. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  2. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of US Manufacturing Plants," Working Paper Series WP03-3, Peterson Institute for International Economics.
  3. Fathi Fakhfakh & Felix FitzRoy, 2004. "Basic Wages and Firm Characteristics: Rent Sharing in French Manufacturing," LABOUR, CEIS, vol. 18(4), pages 615-631, December.
  4. Mahmood Arai, 2003. "Wages, Profits, and Capital Intensity: Evidence from Matched Worker-Firm Data," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 593-618, July.
  5. Martins, Pedro S., 2004. "Rent Sharing Before and After the Wage Bill," IZA Discussion Papers 1376, Institute for the Study of Labor (IZA).
  6. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  7. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 489-530, 05.
  8. Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
  9. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2005. "Trade, wages, and the political economy of trade protection: evidence from the Colombian trade reforms," Journal of International Economics, Elsevier, vol. 66(1), pages 75-105, May.
  10. Sébastien Jean & Giuseppe Nicoletti, 2004. "Regulation and Wage Premia," Working Papers 2004-12, CEPII research center.
  11. Nannan Lundin & Lihong Yun, 2009. "International Trade and Inter-Industry Wage Structure in Swedish Manufacturing: Evidence from Matched Employer-Employee Data," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 87-102, 02.
  12. Maria Guadalupe, 2005. "Product market competition returns to skill and wage inequality," LSE Research Online Documents on Economics 19895, London School of Economics and Political Science, LSE Library.
  13. François Rycx & Brenda Gannon & Robert Plasman & Ilan Tojerow, 2007. "Inter-industry wage differentials and the gender wage gap: Evidence from European countries," ULB Institutional Repository 2013/779, ULB -- Universite Libre de Bruxelles.
  14. Vainiomaki, Jari & Laaksonen, Seppo, 1995. "Inter-industry wage differentials in Finland: Evidence from longitudinal census data for 1975-85," Labour Economics, Elsevier, vol. 2(2), pages 161-173, June.
  15. Philip Du Caju & Gábor Kátay & Ana Lamo & Daphne Nicolitsas & Steven Poelhekke, 2010. "Inter-industry wage differentials in EU countries : What do cross-country time-varying data add to the picture ?," Working Paper Research 189, National Bank of Belgium.
  16. Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, vol. 35(5), pages 1009-1034, July.
  17. Philip Du Caju & François Ryckx & Ilan Tojerow, 2009. "Inter-industry wage differentials : How much does rent sharing matter ?," Working Paper Research 180, National Bank of Belgium.
  18. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  19. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  20. Cuñat, Vicente & Guadalupe, Maria, 2006. "Globalization and the Provision of Incentives Inside the Firm: The Effect of Foreign Competition," IZA Discussion Papers 2408, Institute for the Study of Labor (IZA).
  21. Andrew K.G. Hildreth and Andrew J. Oswald, . "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Economics Discussion Papers 425, University of Essex, Department of Economics.
  22. Mary E. Lovely & J. David Richardson, 1998. "Trade Flows and Wage Premiums: Does Who or What Matter?," NBER Working Papers 6668, National Bureau of Economic Research, Inc.
  23. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
  24. Jan De Loecker, 2011. "Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity," Econometrica, Econometric Society, vol. 79(5), pages 1407-1451, 09.
  25. repec:fth:inseep:2001-16 is not listed on IDEAS
  26. Joop Hartog & Pedro Pereira & José Vieira, 2000. "Inter-industry Wage Dispersion in Portugal," Empirica, Springer, vol. 27(4), pages 353-364, December.
  27. John M. Abowd & Laurence Allain, 1996. "Compensation Structure and Product Market Competition," NBER Working Papers 5493, National Bureau of Economic Research, Inc.
  28. Hirsch, Barry T, 1993. "Trucking Deregulation and Labor Earnings: Is the Union Premium a Compensating Differential?," Journal of Labor Economics, University of Chicago Press, vol. 11(2), pages 279-301, April.
  29. Maurice Kugler & Eric Verhoogen, 2009. "Plants and Imported Inputs: New Facts and an Interpretation," American Economic Review, American Economic Association, vol. 99(2), pages 501-07, May.
  30. Kevin Reilly & Luisa Zanchi, 2002. "Industry Wage Differentials: How Many, Big and Significant Are They?," Labor and Demography 0209001, EconWPA.
  31. Christofides, Louis N & Oswald, Andrew J, 1992. "Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 985-1002, August.
  32. Robert Z. Lawrence, 2000. "Does a Kick in the Pants Get You Going or Does It Just Hurt? The Impact of International Competition on Technological Change in U.S. Manufacturing," NBER Chapters, in: The Impact of International Trade on Wages, pages 197-224 National Bureau of Economic Research, Inc.
  33. Robert Gibbons & Lawrence F. Katz, 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  34. Puja Vasudeva Dutta, 2007. "Trade Protection and Inter-Industry Wages in India," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(2), pages 268-286, January.
  35. Benito, Andrew, 2000. " Inter-industry Wage Differentials in Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(0), pages 727-46, Special I.
  36. Bruno CRÉPON & Rozen DESPLATZ & Jacques MAIRESSE, 2005. "Price-Cost Margins and Rent Sharing: Evidence from a Panel of French Manufacturing Firms," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 583-610.
  37. Revenga, Ana L, 1992. "Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 255-84, February.
  38. John M. Abowd & Thomas Lemieux, 1991. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," NBER Working Papers 3808, National Bureau of Economic Research, Inc.
  39. Ali Skalli & Mahmood Araï & Gérard Ballot, 1996. "Différentiels intersectoriels de salaire et caractéristiques des employeurs en France," Économie et Statistique, Programme National Persée, vol. 299(1), pages 37-58.
  40. Marianne Bertrand, 1999. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," NBER Working Papers 6900, National Bureau of Economic Research, Inc.
  41. Martins, Pedro S., 2004. "Industry wage premia: evidence from the wage distribution," Economics Letters, Elsevier, vol. 83(2), pages 157-163, May.
  42. 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.
  43. François Rycx & Ilan Tojerow & Robert Plasman, 2004. "Rent sharing and the gender wage gap in Belgium," ULB Institutional Repository 2013/785, ULB -- Universite Libre de Bruxelles.
  44. Barth, Erling & Zweimuller, Josef, 1992. "Labor Market Institutions and the Industry Wage Distribution: Evidence from Austria, Norway, and the U.S," Institute for Research on Labor and Employment, Working Paper Series qt1811h146, Institute of Industrial Relations, UC Berkeley.
  45. David Margolis & Kjell G, Salvanes, 2001. "Do Firms Really Share Rents with their Workers," Working Papers 2001-16, Centre de Recherche en Economie et Statistique.
  46. Helwege, Jean, 1992. "Sectoral Shifts and Interindustry Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 55-84, January.
  47. Salvanes, K.G. & Burgess, S. & Lane, J., 1998. "Sources of Earnings Dispersion in a Linked Employer-Employee Dataset: Evidence from Norway," Papers 22/98, Norwegian School of Economics and Business Administration-.
  48. Martins, Pedro S. & Opromolla, Luca David, 2009. "Exports, Imports and Wages: Evidence from Matched Firm-Worker-Product Panels," IZA Discussion Papers 4646, Institute for the Study of Labor (IZA).
  49. Nina Pavcnik & Andreas Blom & Pinelopi Goldberg & Norbert Schady, 2004. "Trade Liberalization and Industry Wage Structure: Evidence from Brazil," World Bank Economic Review, World Bank Group, vol. 18(3), pages 319-344.
  50. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  51. John P. Haisken-DeNew & Christoph M. Schmidt, 2000. "Interindustry and Interregion Differentials: Mechanics and Interpretation," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 516-521, August.
  52. Rose, Nancy L, 1987. "Labor Rent Sharing and Regulation: Evidence from the Trucking Industry," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1146-78, December.
  53. Schank, Thorsten & Schnabel, Claus & Wagner, Joachim, 2007. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Journal of International Economics, Elsevier, vol. 72(1), pages 52-74, May.
  54. Van Reenen, John, 1994. "The Creation and Capture of Rents: Wages and Innovation in a Panel of UK Companies," CEPR Discussion Papers 1071, C.E.P.R. Discussion Papers.
  55. Giovanni Ferro-Luzzi, 1994. "Inter-Industry Wage Differentials in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 130(III), pages 421-443, September.
  56. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  57. Bernard Hoekman & Alan L. Winters, 2005. "Trade and Employment: Stylized Facts and Research Findings," Working Papers 7, United Nations, Department of Economics and Social Affairs.
  58. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399.
  59. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  60. Björklund, Anders & Bratsberg, Bernt & Eriksson, Tor & Jäntti, Markus & Raaum, Oddbjørn, 2004. "Inter-Industry Wage Differentials and Unobserved Ability: Siblings Evidence from Five Countries," IZA Discussion Papers 1080, Institute for the Study of Labor (IZA).
  61. Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2007. "The Effect of Globalization on Union Bargaining and Price-Cost Margins of Firms," LICOS Discussion Papers 18107, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  62. Maarten Goos & Jozef Konings, 2000. "Does Rent-Sharing Exist in Belgium? an Empirical Analysis Using Firm Level Data," Center for Economic Studies - Discussion papers ces0019, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  63. Raymond Robertson, 2000. "Trade Liberalisation and Wage Inequality: Lessons from the Mexican Experience," The World Economy, Wiley Blackwell, vol. 23(6), pages 827-849, 06.
  64. Johannes Van Biesebroeck, 2003. "Exporting Raises Productivity in Sub-Saharan African Manufacturing Plants," NBER Working Papers 10020, National Bureau of Economic Research, Inc.
  65. Cuñat, Vicente & Guadalupe, Maria, 2006. "Globalization and the Provision of Incentives Inside the Firm," CEPR Discussion Papers 5950, C.E.P.R. Discussion Papers.
  66. Walsh, Frank, 1999. "A Multisector Model of Efficiency Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 351-76, April.
  67. Kahn, Lawrence M, 1998. "Collective Bargaining and the Interindustry Wage Structure: International Evidence," Economica, London School of Economics and Political Science, vol. 65(260), pages 507-34, November.
  68. Matthew J. Slaughter, 1999. "Globalisation and Wages: A Tale of Two Perspectives," The World Economy, Wiley Blackwell, vol. 22(5), pages 609-629, 07.
  69. John W. Budd & Matthew J.Slaughter, 2000. "Are Profits Shared Across Borders? Evidence on International Rent Sharing," NBER Working Papers 8014, National Bureau of Economic Research, Inc.
  70. Sébastien Jean & Giuseppe Nicoletti, 2002. "Product Market Regulation and Wage Premia in Europe and North America: An Empirical Investigation," OECD Economics Department Working Papers 318, OECD Publishing.
  71. Alan Carruth & William Collier & Andy Dickerson, 2004. "Inter-industry Wage Differences and Individual Heterogeneity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 811-846, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp5597. 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: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.