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Trade liberalisation and wages in South African manufacturing

  • Fiandeiro, M. Fatima
  • Rankin, Neil A.

There is a popular perception that recent trade liberalisation in South Africa has been bad for jobs. This paper examines this by investigating the relationship between tariffs, both levels and changes, and wages in the manufacturing sector. This is done through matching individual labour force data with industry level tariff data and estimating Mincerian earnings equations. The results suggest that an identical individual in a low tariff sector earns more than one in a high tariff sector. Furthermore, wages are higher in those sectors that have undergone greater liberalisation. These results are robust to controlling for sector characteristics as well as selectivity into manufacturing jobs. Contrary to popular perception, these results suggest that trade liberalisation is good for wages. Two possible explanations of this positive relationship are investigated. The first is that trade liberalisation has resulted in low wage job shedding in those sectors that have liberalised. There is some evidence that this is occurring. The second is that wages in liberalising sectors have risen relative to sectors where tariffs have remained the same – the evidence provided suggests that this may also be an explanation.

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File URL: http://mpra.ub.uni-muenchen.de/17066/1/MPRA_paper_17066.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17066.

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Date of creation: Feb 2008
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Handle: RePEc:pra:mprapa:17066
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  1. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  2. repec:cup:cbooks:9780521367288 is not listed on IDEAS
  3. Lawrence Edwards, 2005. "Has South Africa Liberalised Its Trade?," South African Journal of Economics, Economic Society of South Africa, vol. 73(4), pages 754-775, December.
  4. 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.
  5. J. Paul Dunne & Lawrence Edwards, 2006. "Trade Technology and Employment: A case Study of South Africa," Working Papers 0602, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  6. Lawrence Edwards & Alberto Behar, 2005. "Trade liberalisation and labour demand within South African manufacturing firms," Working Papers 06, Economic Research Southern Africa.
  7. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March.
  8. L Edwards, 2001. "Globalisation And The Skills Bias Of Occupational Employment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 69(1), pages 40-71, 03.
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