IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/4177.html
   My bibliography  Save this paper

Trade and Wage Inequality in Developing Countries: South-South Trade Matters

Author

Listed:
  • Gourdon, Julien

Abstract

The relationship between trade liberalization and inequality has received considerable attention in recent years. The primary purpose of this paper is to present new results on the sources of wage inequalities in manufacturing taking into account South-South (S-S) trade. Globalization not only leads to increasing North-South (N-S) trade, but the direction and composition of trade has also changed. More trade is carried out between developing countries. We observe increasing wage inequality is more due to the South-South trade liberalization than to the classical trade liberalization with northern countries. The second purpose is to elucidate the link between the direction of trade and technological change, arguing that it might explain why we obtain different results for South-South trade and North-South trade on wage inequality. A part of this increasing wage inequality due to S-S trade comes from the development of N-S trade relationship in S-S trade which increases wage inequality in middle income developing countries. However the fact that S-S trade is more skill intensive sector oriented increase wage inequality for all developing countries.

Suggested Citation

  • Gourdon, Julien, 2007. "Trade and Wage Inequality in Developing Countries: South-South Trade Matters," MPRA Paper 4177, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:4177
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/4177/1/MPRA_paper_4177.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/4824/1/MPRA_paper_4824.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages 73-96, February.
    2. Anne O. Krueger, 1983. "Trade and Employment in Developing Countries, Volume 3: Synthesis and Conclusions," NBER Books, National Bureau of Economic Research, Inc, number krue83-1.
    3. Amelia U. Santos‐Paulino, 2004. "Trade Liberalization and the Balance of Payments in Selected Developing Countries," Manchester School, University of Manchester, vol. 72(1), pages 100-118, January.
    4. Lopez, Humberto, 2006. "Growth and inequality: Are the 1990s different?," Economics Letters, Elsevier, vol. 93(1), pages 18-25, October.
    5. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2000), pages 109-154, August.
    6. Branko Milanovic & Lyn Squire, 2007. "Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence," NBER Chapters, in: Globalization and Poverty, pages 143-182, National Bureau of Economic Research, Inc.
    7. P. Tharakan, 1986. "The intra-industry trade of Benelux with the developing world," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 122(1), pages 131-149, March.
    8. 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.
    9. Donald Robbins, 1997. "Trade and wages in Colombia," Estudios de Economia, University of Chile, Department of Economics, vol. 24(1 Year 19), pages 47-83, June.
    10. Esquivel, Gerardo & Rodriguez-Lopez, Jose Antonio, 2003. "Technology, trade, and wage inequality in Mexico before and after NAFTA," Journal of Development Economics, Elsevier, vol. 72(2), pages 543-565, December.
    11. Havrylyshyn, Oli, 1990. "Trade Policy and Productivity Gains in Developing Countries: A Survey of the Literature," The World Bank Research Observer, World Bank, vol. 5(1), pages 1-24, January.
    12. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    13. Keller, Wolfgang, 1996. "Absorptive capacity: On the creation and acquisition of technology in development," Journal of Development Economics, Elsevier, vol. 49(1), pages 199-227, April.
    14. Sylvain Chabe-Ferret & Julien Gourdon & Mohamed Ali Marouani & Tancrède Voituriez, 2007. "Trade-Induced Changes in Economic Inequality: Assessment Issues and Policy Implications for Developing Countries," Working Papers DT/2007/11, DIAL (Développement, Institutions et Mondialisation).
    15. Havrylyshyn, Oli & Civan, Engin, 1985. "Intra-industry trade among developing countries," Journal of Development Economics, Elsevier, vol. 18(2-3), pages 253-271, August.
    16. Martin Rama, 2002. "Globalization and Workers in Developing Countries," Economics Study Area Working Papers 41, East-West Center, Economics Study Area.
    17. Robbins, Donald, 1996. "Stolper-Samuelson (Lost) In The Tropics Trade Liberalization And Wages In Colombia: 1976-1994," Harvard Institute for International Development (HIID) Papers 294380, Harvard University, Kennedy School of Government.
    18. Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June.
    19. Robbins, Donald J., 1996. "Hos Hits Facts: Facts Win Evidence On Trade And Wages In The Developing World," Harvard Institute for International Development (HIID) Papers 294374, Harvard University, Kennedy School of Government.
    20. Krueger, Anne O., 1990. "Perspectives on Trade and Development," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226454900, December.
    21. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins of Technology-Skill Complementarity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 693-732.
    22. Lucian Cernat, 2001. "ASSESSING REGIONAL TRADE ARRANGEMENTS: ARE SOUTH–SOUTH RTAs MORE TRADE DIVERTING?," International Trade 0109001, University Library of Munich, Germany.
    23. N/A, 2001. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 176(1), pages 35-60, April.
    24. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 709-728, June.
    25. Daron Acemoglu, 2003. "Patterns of Skill Premia," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 199-230.
    26. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2005. "Trade, wages, and the political economy of trade protection: evidence from the Colombian trade reforms," Journal of International Economics, Elsevier, vol. 66(1), pages 75-105, May.
    27. Zhu, Susan Chun & Trefler, Daniel, 2005. "Trade and inequality in developing countries: a general equilibrium analysis," Journal of International Economics, Elsevier, vol. 65(1), pages 21-48, January.
    28. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
    29. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    30. Pissarides, Christopher A, 1997. "Learning by Trading and the Returns to Human Capital in Developing Countries," The World Bank Economic Review, World Bank, vol. 11(1), pages 17-32, January.
    31. Donald J. Robbins, 1996. "Evidence on Trade and Wages in the Developing World," OECD Development Centre Working Papers 119, OECD Publishing.
    32. 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.
    33. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
    34. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," The World Bank Economic Review, World Bank, vol. 11(1), pages 33-57, January.
    35. James E. Rauch & Vitor Trindade, 2000. "Information and Globalization: Wage Co-Movements, Labor Demand Elasticity, and Conventional Trade Liberalization," NBER Working Papers 7671, National Bureau of Economic Research, Inc.
    36. Davis, Donald, 1996. "Trade Liberalization And Income Distribution," Harvard Institute for International Development (HIID) Papers 294371, Harvard University, Kennedy School of Government.
    37. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
    38. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    39. N/A, 2001. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 175(1), pages 29-58, January.
    40. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-468, November.
    41. 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.
    42. Maurice Schiff & Yanling Wang, 2004. "Regional Integration And North-South Technology Diffusion: The Case of Nafta," Working Papers Central Bank of Chile 283, Central Bank of Chile.
    43. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
    44. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," Harvard Institute of Economic Research Working Papers 1769, Harvard - Institute of Economic Research.
    45. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    46. Amelia Santos-Paulino & A. P. Thirlwall, 2004. "The impact of trade liberalisation on exports, imports and the balance of payments of developing countries," Economic Journal, Royal Economic Society, vol. 114(493), pages 50-72, February.
    47. N/A, 2005. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 191(1), pages 8-30, January.
    48. Card, David & Lemieux, Thomas, 1994. "Changing Wage Structure and Black-White Wage Differentials," American Economic Review, American Economic Association, vol. 84(2), pages 29-33, May.
    49. Alessandro Nicita & Marcelo Olarreaga, 2007. "Trade, Production, and Protection Database, 1976--2004," The World Bank Economic Review, World Bank, vol. 21(1), pages 165-171.
    50. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
    51. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    52. Anne O. Krueger, 1983. "Trade and Employment in Less Developed Countries: The Questions," NBER Chapters, in: Trade and Employment in Developing Countries, Volume 3: Synthesis and Conclusions, pages 1-9, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Meltem Ucal & Alfred Albert Haug & Mehmet Hüseyin Bilgin, 2016. "Income inequality and FDI: evidence with Turkish data," Applied Economics, Taylor & Francis Journals, vol. 48(11), pages 1030-1045, March.
    2. Ucal, Meltem & Bilgin, Mehmet Huseyin, 2009. "Income Inequality and FDI in Turkey: FM-OLS (Phillips-Hansen) Estimation and ARDL Approach to Cointegration," MPRA Paper 48765, University Library of Munich, Germany.
    3. Ribeiro, Ana Paula & Carvalho, Vitor & Ferreira, Mariana, 2020. "The effect of globalization on wage inequality: an application to the European Union before the Great Recession," MPRA Paper 110697, University Library of Munich, Germany.
    4. Munem Ahmad Chowdhury & Hafsa Rahman Nijhum & Kazi Mohammed Kamal Uddin, 2021. "Disintegrated Impact of Trade Openness on Income Inequality: Empirical Evidence from Bangladesh," Business and Economic Research, Macrothink Institute, vol. 11(3), pages 1-18, December.
    5. García Muñoz, Teresa María & Milgram Baleix, Juliette & Odeh, Omar Odeh, 2020. "Inequality in Latin America: The role of the nature of trade and partners," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 14, pages 1-35.
    6. Jauhari, Azmafazilah Binti & khalifah, noor, 2018. "Trade Linkages and Skill Demand: Empirical Evidence for the Malaysian Electrical and Electronics Industries," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(1), pages 89-103.
    7. Mr. Alberto Behar, 2013. "The Endogenous Skill Bias of Technical Change and Inequality in Developing Countries," IMF Working Papers 2013/050, International Monetary Fund.
    8. Farole, Thomas & Hollweg, Claire & Winkler, Deborah, 2018. "Trade in Global Value Chain: An Assessment of Labor Market Implication," Jobs Group Papers, Notes, and Guides 30318036, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Julien Gourdon, 2011. "Wage inequality in developing countries: South–South trade matters," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 58(4), pages 359-383, December.
    2. Zouhair Mrabet, 2012. "The Impact of Trade Liberalization on Labor Market of Developing Countries: What can Literature tell us?," Journal of Economics and Behavioral Studies, AMH International, vol. 4(6), pages 307-318.
    3. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    4. Meschi, Elena & Vivarelli, Marco, 2009. "Trade and Income Inequality in Developing Countries," World Development, Elsevier, vol. 37(2), pages 287-302, February.
    5. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
    6. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    7. Paolo Giordano & Kun Li, 2012. "An Updated Assessment of the Trade and Poverty Nexus in Latin America," IDB Publications (Working Papers) 79119, Inter-American Development Bank.
    8. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
    9. repec:dau:papers:123456789/12528 is not listed on IDEAS
    10. Atolia, Manoj, 2007. "Trade liberalization and rising wage inequality in Latin America: Reconciliation with HOS theory," Journal of International Economics, Elsevier, vol. 71(2), pages 467-494, April.
    11. Pranab Bardhan, 2006. "Globalization, Inequality, and Poverty," IDB Publications (Working Papers) 9126, Inter-American Development Bank.
    12. Yoshimichi Murakami, 2018. "Globalization and Income Inequality in Latin America: A Review of Theoretical Developments and Recent Evidence," Discussion Paper Series DP2018-16, Research Institute for Economics & Business Administration, Kobe University, revised Aug 2018.
    13. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    14. Lanouar Charfeddine & Zouhair Mrabet, 2015. "Trade liberalization and relative employment: further evidence from Tunisia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 173-202, June.
    15. Meschi, Elena & Vivarelli, Marco, 2007. "Globalization and Income Inequality," IZA Discussion Papers 2958, Institute of Labor Economics (IZA).
    16. Mr. Alberto Behar, 2013. "The Endogenous Skill Bias of Technical Change and Inequality in Developing Countries," IMF Working Papers 2013/050, International Monetary Fund.
    17. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
    18. Thierry Verdier, 2005. "Intégration commerciale « socialement responsable » : une approche en termes d'économie politique," Revue d’économie du développement, De Boeck Université, vol. 13(4), pages 55-121.
    19. Giordano, Paolo & Li, Kun, 2012. "An Updated Assessment of the Trade and Poverty Nexus in Latin America," IDB Publications (Working Papers) 4209, Inter-American Development Bank.
    20. repec:ipg:wpaper:2014-504 is not listed on IDEAS
    21. Gallego, Francisco A., 2012. "Skill Premium in Chile: Studying Skill Upgrading in the South," World Development, Elsevier, vol. 40(3), pages 594-609.
    22. Atolia, Manoj & Kurokawa, Yoshinori, 2016. "The impact of trade margins on the skill premium: Evidence from Mexico," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 895-915.

    More about this item

    Keywords

    International Trade; Wage Inequality; Skill-biased technical change;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • F1 - International Economics - - Trade

    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:pra:mprapa:4177. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.