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Trade Liberalization and Wage Inequality in the Philippines

Author

Listed:
  • Rana Hasan

    (Asian Development Bank)

  • Karl Robert L. Jandoc

    (School of Economics, University of the Philippines Diliman)

Abstract

We examine the role of trade liberalization in accounting for increasing wage inequality in the Philippines from 1994 to 2000--a period over which trade protection declined and inequality increased dramatically. Using the approach of Ferreira, Leite, and Wai-Poi (2007), we find that trade-induced effects on industry wage premia and industry-specific skill premia account for an economically insignificant increase in wage inequality. A more substantial role for trade liberalization comes through trade-induced employment reallocation effects whereby reductions in protection appear to have led to a shift of employment to more protected sectors, especially services where wage inequality tended to be high to begin with. Nevertheless, the key drivers of wage inequality appear to be changes in economy-wide returns to education and changes in industry membership over and above those accounted for by our estimates of trade-induced employment reallocation effects. In order for trade liberalization to account for a relatively large portion of the increases in wage inequality, it would have to be a major determinant of the changes in economy-wide returns to education.

Suggested Citation

  • Rana Hasan & Karl Robert L. Jandoc, 2010. "Trade Liberalization and Wage Inequality in the Philippines," UP School of Economics Discussion Papers 201006, University of the Philippines School of Economics.
    • Handle: RePEc:phs:dpaper:201006
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    References listed on IDEAS

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    1. repec:wbk:wbpubs:14844 is not listed on IDEAS
    2. Arsenio Balisacan & Rosemarie Edillon, 2005. "Poverty Targeting in the Philippines," Chapters, in: John Weiss (ed.), Poverty Targeting in Asia, chapter 6, Edward Elgar Publishing.
    3. Nina Pavcnik & Andreas Blom & Pinelopi Goldberg & Norbert Schady, 2004. "Trade Liberalization and Industry Wage Structure: Evidence from Brazil," The World Bank Economic Review, World Bank, vol. 18(3), pages 319-344.
    4. Zadia M. Feliciano, 2001. "Workers and Trade Liberalization: The Impact of Trade Reforms in Mexico on Wages and Employment," ILR Review, Cornell University, ILR School, vol. 55(1), pages 95-115, October.
    5. Orbeta, Aniceto Jr. C., 2002. "Globalization and Employment: The Impact of Trade on Employment Level and Structure in the Philippines," Discussion Papers DP 2002-04, Philippine Institute for Development Studies.
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    Cited by:

    1. Elizabeth Jane Casabianca, 2012. "Distributional effects of preferential and multilateral trade liberalization: the case of Paraguay," FIW Working Paper series 083, FIW.
    2. Rafaelita Aldaba, . "Impact of Trade Liberalization on Wage Skill Premium in Philippine Manufacturing," Chapters, in: Chine Hee HAHN & Dionisius Narjoko (ed.), Impact of Globalization on Labor Market, chapter 4, pages 69-105, Economic Research Institute for ASEAN and East Asia (ERIA).
    3. Yoshimichi Murakami, 2021. "Trade liberalization and wage inequality: Evidence from Chile," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(3), pages 407-438, April.

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