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Does tariff liberalization increase wage inequality? Some empirical evidence

Author

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  • Branko Milanovic

    (Carnegie Endowment for International Peace)

  • Lyn Squire

    (Global Development Network)

Abstract

The objective of the paper is to answer an often-asked question : if tariff rates are reduced, what will happen to wage inequality ? We consider two types of wage inequality : between occupations (skills premium), and between industries. We use two large data bases of wage inequality that have become recently available and a large dataset of average tariff rates all covering the period between 1980 and 2000. We find that tariff reduction is associated with higher inter-occupational and inter-industry inequality in poorer countries (those below the world median income) and the reverse in richer countries. The results for inter-occupational inequality though must be treated with caution.

Suggested Citation

  • Branko Milanovic & Lyn Squire, 2005. "Does tariff liberalization increase wage inequality? Some empirical evidence," Labor and Demography 0501012, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0501012
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    References listed on IDEAS

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    More about this item

    Keywords

    tariffs; trade; liberalization; wages; inequality;

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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