Trade liberalisation and wages in South African manufacturing
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.
|Date of creation:||Feb 2008|
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