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Relative Factor Return Gaps in Labour Markets and Global Integration

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  • Mamoon, Dawood

Abstract

We estimate the role of openness and integration in welfare generation in a cross country framework. Once controlling for institutions, openness is generally associated with increased wage inequalities across nations. However the results for trade policy are mixed. Decrease in import taxes increase wage inequality, whereas decrease in export taxes has an egalitarian effect. The results are applicable only to the larger sample of developed and developing countries. If the sample is restricted to developing countries, protection by means of export and import taxes is good for unskilled workers as higher trade taxes seem to put a downward pressure on the wage gaps between skilled and unskilled. The results highlight the bottle neck faced by both developing and developed countries in WTO talks which have not been successful as yet in terms of further decrease in trade taxes. In case this situation prevails, the paper calls for more South-South trade which would enable developing countries to decrease the relative wage gaps among their labour force.

Suggested Citation

  • Mamoon, Dawood, 2007. "Relative Factor Return Gaps in Labour Markets and Global Integration," MPRA Paper 3045, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:3045
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    File URL: https://mpra.ub.uni-muenchen.de/3045/1/MPRA_paper_3045.pdf
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    References listed on IDEAS

    as
    1. Mamoon, D. & Murshed, S.M., 2005. "Are institutions more important than integration?," ISS Working Papers - General Series 19177, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    2. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July.
    3. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    4. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 613-646.
    5. Alberto Chong & Mark Gradstein, 2007. "Inequality and Institutions," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 454-465, August.
    6. Milanovic, Branko, 2003. "The Two Faces of Globalization: Against Globalization as We Know It," World Development, Elsevier, vol. 31(4), pages 667-683, April.
    7. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
    8. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    9. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
    10. Cragg, John G. & Donald, Stephen G., 1993. "Testing Identifiability and Specification in Instrumental Variable Models," Econometric Theory, Cambridge University Press, vol. 9(02), pages 222-240, April.
    11. Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 133-162, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    International Trade; Redistribution; Inequality; Cross Section Models;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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