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Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence

  • Branko Milanovic
  • Lyn Squire

The objective of the paper is to answer an often-asked question : if tariff rates are reduced, what will happen to wage inequality ? We consider two types of wage inequality : between occupations (skills premium), and between industries. We use two large data bases of wage inequality that have become recently available and a large dataset of average tariff rates all covering the period between 1980 and 2000. We find that tariff reduction is associated with higher inter-occupational and inter-industry inequality in poorer countries (those below the world median income) and the reverse in richer countries. The results for inter-occupational inequality though must be treated with caution.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11046.

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Date of creation: Jan 2005
Date of revision:
Publication status: published as Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence , Branko Milanovic, Lyn Squire. in Globalization and Poverty , Harrison. 2007
Handle: RePEc:nbr:nberwo:11046
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