IDEAS home Printed from https://ideas.repec.org/p/oec/traaab/134-en.html
   My bibliography  Save this paper

Openness, Wage Gaps and Unions in Chile: A Micro Econometric Analysis

Author

Listed:
  • Jorge Friedman

    (ECLAC)

  • Nanno Mulder

    (ECLAC)

  • Sebastián Faúndez

    (ECLAC)

  • Esteban Pérez Caldentey

    (ECLAC)

  • Carlos Yévenes

    (ECLAC)

  • Mario Velásquez

    (ILO)

  • Fernando Baizán

    (ILO)

  • Gerhard Reinecke

    (ILO)

Abstract

This paper examines the relationship between wages and levels of trade and FDI openness in twenty-nine sectors of the Chilean economy. Over the last four decades, this country almost fully liberalized its trade and foreign direct investment, which accelerated growth of flows in both areas and contributed to important changes in the labour market. Using cluster analysis, we divide 29 sectors into three groups of high, medium and low levels of trade and foreign direct investment penetration in 2003 and 2008. Subsequently, an average wage equation is estimated for salaried workers in each group based on their characteristics (gender, education, work experience and union membership) using microdata of the Supplementary Income Survey (SIS) database. Differences between average wages of the three groups are decomposed with the Oaxaca-Blinder method. The results confirm that the group of most open sectors pays a “wage premium” to its workers. It is also shown that most of this premium is accounted for by higher levels of labour unionisation compared to other sectors. An alternative grouping of sectors into two categories of tradable and non-tradable sectors based on export intensity only yields similar results.

Suggested Citation

  • Jorge Friedman & Nanno Mulder & Sebastián Faúndez & Esteban Pérez Caldentey & Carlos Yévenes & Mario Velásquez & Fernando Baizán & Gerhard Reinecke, 2011. "Openness, Wage Gaps and Unions in Chile: A Micro Econometric Analysis," OECD Trade Policy Papers 134, OECD Publishing.
  • Handle: RePEc:oec:traaab:134-en
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1787/5kg3h0gcjkf1-en
    Download Restriction: no

    References listed on IDEAS

    as
    1. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 245-276.
    2. Elisa Borghi, 2005. "Trade openness and wage distribution in Chile," KITeS Working Papers 173, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Sep 2005.
    3. Pavcnik, Nina & Blom, Andreas & Goldberg, Pinelopi & Schady, Norbert, 2003. "Trade liberalization and labor market adjustment in Brazil," Policy Research Working Paper Series 2982, The World Bank.
    4. Koujianou Goldberg, Pinelopi & Pavcnik, Nina, 2003. "The response of the informal sector to trade liberalization," Journal of Development Economics, Elsevier, vol. 72(2), pages 463-496, December.
    5. Gindling, T. H. & Robbins, Donald, 2001. "Patterns and Sources of Changing Wage Inequality in Chile and Costa Rica During Structural Adjustment," World Development, Elsevier, vol. 29(4), pages 725-745, April.
    6. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, Elsevier.
    7. Thomas Lemieux, 2002. "Decomposing changes in wage distributions: a unified approach," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 646-688, November.
    8. Gallego, Francisco A., 2012. "Skill Premium in Chile: Studying Skill Upgrading in the South," World Development, Elsevier, vol. 40(3), pages 594-609.
    9. James Levinsohn, 1996. "Firm Heterogeneity, Jobs, and International Trade: Evidence from Chile," NBER Working Papers 5808, National Bureau of Economic Research, Inc.
    10. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
    11. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June.
    12. Francisco Gallego, 2006. "Skill Premium in Chile: Studying the Skill Bias Technical Change Hypothesis in the South," Working Papers Central Bank of Chile 363, Central Bank of Chile.
    13. Ivan T. Kandilov, 2009. "Do Exporters Pay Higher Wages? Plant-level Evidence from an Export Refund Policy in Chile," World Bank Economic Review, World Bank Group, vol. 23(2), pages 269-294, June.
    14. 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.
    15. Irene Brambilla & Rafael Dix-Carneiro & Daniel Lederman & Guido Porto, 2012. "Skills, Exports, and the Wages of Seven Million Latin American Workers," World Bank Economic Review, World Bank Group, vol. 26(1), pages 34-60.
    16. Roberto Álvarez & Luis Opazo, 2011. "Effects of Chinese Imports on Relative Wages: Microevidence from Chile," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113, pages 342-363, June.
    17. Roberto Alvarez & Ricardo López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1384-1400, November.
    18. Bussolo, Maurizio & Mizala, Alejandra & Romaguera, Pilar, 2002. "Beyond Heckscher-Ohlin: trade and labour market interactions in a case study for Chile," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 639-666, November.
    19. 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.
    20. Wood Júnior, Thomaz, 1995. "Workers," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 35(2), March.
    21. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
    22. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
    23. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Chile; employment; inclusive growth; Oaxaca-Blinder method; openness; trade; unionisation; wage gap; wages;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oec:traaab:134-en. 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: (). General contact details of provider: http://edirc.repec.org/data/tdoecfr.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.