Education bias of trade liberalization and wage inequality in developing countries

The aim of this article is to examine the impact of increased trade on wage inequality in developing countries, and whether a higher human capital stock moderates this effect. We look at the skilled–unskilled wage differential. When better educated societies open up their economies, increased trade is likely to induce less inequality on impact because the supply of skills better matches demand. But greater international exposure also brings about technological diffusion, further raising skilled labour demand. This may raise wage inequality, in contrast to the initial egalitarian level effect of human capital. We attempt to measure these two opposing forces. We also employ a broad set of indicators to measure trade liberalization policies as well as general openness, which is an outcome, and not a policy variable. We further examine what type of education most reduces inequality. Our findings suggest that countries with a higher level of initial human capital do well on the inequality front, but human capital which accrues through the trade liberalization channel has inegalitarian effects. Our results also have implications for the speed at which trade policies are liberalized, the implication being that better educated nations should liberalize faster.     

Foreign Direct Investment,Productivity, Demand for Skilled Labour and Wage Inequality: An Analysis of Uruguay

This study seeks to identify the causal effects of foreign ownership on productivity, the demand for skilled labour and wage inequality. With this aim, we use differences‐in‐differences techniques for a panel of Uruguayan manufacturing firms in the period 1997–2005. Our results seem to indicate that FDI causes higher productivity and increased demand for skilled labour. Furthermore, although average wages are higher in foreign‐owned firms than in domestic ones, the wage gap between skilled and unskilled workers is wider. It follows that promoting foreign investment enhances productivity. In addition, due to the greater demand for skilled workers, policies such as training schemes would be conducive to raising productivity still further, while other social policies could help to mitigate the wage inequality effects.     

Urban development,excessive entry of firms and wage inequality in developing countries

This paper examines the short and long-term effects of urbanisation, via favourable urban development policies, on income distribution and social welfare for a developing country, in which the urban manufacturing sector is characterised by imperfect competition and free entry. Urbanisation shifts rural workers to the highly productive urban sector, while causing production in urban firms to expand because of scale economies. However, urbanisation may worsen wage inequality between skilled and unskilled labour in the short term. In the long term, urbanisation can attract new firms to the urban sector and favourable urban development policies may result in excessive entry of firms, which can amplify wage inequality in the economy. This entry-amplifying effect is confirmed empirically, especially for low and lower-middle-income countries. If the entry effect is not considered, the impact of urbanisation on wage inequality could be understated by 13% for low and lower-middle-income countries.     

Trade liberalisation and human capital adjustment

This paper highlights the way in which workers of different ages and abilities are affected by anticipated and unanticipated trade liberalisations. A two-factor (skilled and unskilled labour), two-sector Heckscher-Ohlin trade model is supplemented with an education sector which uses skilled labour and time to convert unskilled workers into skilled workers. A skilled worker's income depends on her ability, but all unskilled workers have the same income. Trade liberalisation in a relatively skilled labour abundant country increases the relative skilled wage and induces skill upgrading by the existing workforce, with younger and more able unskilled workers most likely to upgrade. But not all upgraders are better off as a result of the liberalisation. The older and less able upgraders are likely to lose. For an anticipated liberalisation we show that the preferred upgrading strategies depend on a worker's ability and that much of the upgrading will take place before the liberalisation. Hence some workers who would have upgraded had they anticipated the liberalisation will not if it is unanticipated, and adjustment assistance that applies only to post-liberalisation upgraders will fail to compensate some losers and distort the upgrading decisions of others.     

贸易自由化对中国城镇劳动力市场性别歧视的影响

贸易自由化既可缩小也可扩大性别工资差。绝大多数实证研究,例如Oosdendorp(2004),都采用的是较宏观的行业加总数据,并着重于职业性别工资差。然而,行业加总的职业工资不能控制教育水平和经验变量,因此很难判断性别工资差的变化到底来自个人特征因素还是贸易自由化。文章运用中国城镇居民家庭的微观数据,运用difference-in-difference的方法,在消除了不随时间改变的固定效应和随时间变化的系统冲击的基础上,检验了1988年到1995年中国第一次贸易自由化兴起时期,贸易开放度的变化对不同教育水平的性别工资差的影响。结果显示,这一时期贸易开放度和性别工资差之间的相互关系主要来源于进口开放度的变化:随着进口开放度的上升,低教育人群的性别工资差显著扩大,而高教育人群的性别工资差却呈现相反趋势。出口开放度的上升对低教育人群的性别工资差没有显著影响,但与进口开放度的上升一样,它缩小了高教育人群的性别工资差。     

Structural Reforms and Labour‐market Outcomes: International Panel‐data Evidence

This paper explores the impact of structural reforms on a comprehensive set of macro‐level labour‐market outcomes, including the unemployment rate, the average wage index, and overall and female employment levels and labour force participation rates. Together, these outcome variables capture the overall health of the labour market and the aggregate welfare of workers. Yet, to our knowledge, there seems to be no other comprehensive empirical investigation in the existing literature of the impact of structural reforms at the cross‐country macro‐level on labour‐market outcomes other than the unemployment rate. After documenting the average trends across countries in the labour‐market outcomes up to 10 years on either side of each country's structural reform year, we run fixed‐effects ordinary least squares and instrumental variables regressions to account for the likely endogeneity of structural reforms to labour‐market outcomes. Overall, the results suggest that structural reforms lead to positive outcomes for labour. Redistributive effects in favour of workers, along the lines of the Stolper‐Samuelson effect, may be at work.     

Basic Needs,Government Debt and Economic Growth

This paper investigates the relationships between basic needs and economic growth where the interactions between output, health, nutrition and education are explicitly simultaneous. We find a unidirectional relationship that improving basic welfare contributes strongly to labour productivity change, but a clear reverse causation only from growth to nutrition. There are substantial differences in the patterns of simultaneous interactions at different income and welfare levels. There are strong self‐reinforcing effects of literacy and debt service on poverty, making it difficult for poor countries to rectify their situation. Channelling resources towards improving health, education and nutrition could bring dramatic economic returns.     

Long‐term Effects of the Efficiency Wage Hypothesis in Goodwin‐type Economies

The existence of an efficiency wage mechanism in Goodwin‐type models may lead to the unexpected appearance of an economically meaningful equilibrium with zero labour share, which is globally stable for some parameter constellation and allows the system to attain its ‘maximal growth'. A subsequent ‘normative’ comparison between the possible long‐term regimes of the economy shows that (1) the zero labour share equilibrium can be the ‘preferred’ equilibrium in terms of welfare; (2) in all the long‐term regimes the welfare is higher than in the original Goodwin model; (3) a point of maximal welfare exists. Moreover, the effects of rational behaviour of firms are compared with the ‘traditional’ situation in which rationality is not explicitly assumed. A striking result appears: myopic rationality can have deleterious effects on the profit of firms and on the overall welfare of the economy.     

Computational Analysis of the Menu of US‐Japan Trade Policies

We have used the Michigan Computable General Equilibrium (CGE) Model of World Production and Trade to calculate the aggregate welfare and sectoral employment effects of the menu of US‐Japan trade policies. The menu of policies encompasses the various preferential US and Japan bilateral and regional free trade agreements (FTAs) negotiated and in process, unilateral removal of existing trade barriers and global (multilateral) free trade. The welfare impacts of the FTAs on the United States and Japan are shown to be rather small in absolute and relative terms. The sectoral employment effects are also generally small but vary across the individual sectors depending on the patterns of the bilateral liberalisation. The welfare effects on the FTA partner countries are mostly positive though generally small, but there are some indications of potentially disruptive employment shifts in some partner countries. There are indications of trade diversion and detrimental welfare effects on non‐member countries for some of the FTAs analysed. In comparison to the welfare gains from the US and Japan bilateral FTAs, the gains from both unilateral trade liberalisation by the United States, Japan and the FTA partners, and from global (multilateral) free trade are shown to be rather substantial and more uniformly positive for all countries in the global trading system. The US and Japan FTAs are based on ‘hub’ and ‘spoke’ arrangements. We show that the spokes emanate out in different and often overlapping directions, suggesting that the complex of bilateral FTAs may create distortions of the global trading system.     

Economic Reform,Skill Formation and Foreign Capital

Does trade liberalisation promote skill formation and positively influence the inflow of foreign capital in an economy? How do incentives offered to foreign capital affect skill formation and skilled‐unskilled wage inequality? Is liberalisation of agricultural exports counterproductive to skill formation and foreign capital inflow in the economy? We try to capture these relationships between foreign capital and skill formation in a small open economy facing various exogenous shocks. Among other results, we show that import liberalisation increases skill formation and the inflow of foreign capital in the country. We explore the evolving state of the skilled‐unskilled wage gap in a regime of greater skill formation.     

Fairness,trade, and inequality

We develop a model of international trade between two symmetric countries that features inter-group inequality between managers and workers, and also intra-group inequality within each of those two groups. Individuals are heterogeneous with respect to their managerial ability, and firms run by more able managers have a higher productivity level and make higher profits. There is rent sharing at the firm level due to fair wage preferences of workers, and hence firms with higher profits pay higher wages in equilibrium in order to elicit their workers' full effort. We show that in this framework international trade leads to a self-selection of the best firms into export status, with exporting firms having to pay a wage premium. Aggregate welfare increases, but there is also larger inequality along multiple dimensions: Involuntary unemployment and income inequality between managers and workers increase, and so does inequality within these two subgroups of individuals, as measured by the respective Gini coefficients.     

Access to imported intermediates and intra‐firm wage inequality

We use Chinese firm‐level data from the World Bank Investment Climate Survey to examine the link between importing intermediates and intra‐firm wage inequality. Our results show that intermediate input importers not only have a significant wage premium but also have a greater intra‐firm wage dispersion than non‐importing firms. This pattern is robust when we control for productivity and use trade costs as the instruments. We further investigate the mechanism of how importing intermediates might contribute to both inter‐firm and intra‐firm wage inequality. Our evidence is consistent with three important channels. First, imported intermediate inputs complement skilled labour. Second, intermediates importers are more likely to use performance pay. Third, imported inputs complement innovation and employee training.     

Private Versus Public Sector Wage Gap: Does Origin Matter?

The integration of immigrants and their children is a burning issue in France. Governments mainly build their integration policies on the labour market. The public sector is reputed to better assimilate minorities because of its entrance exams and pay scales. In this article, using a switching model, a comparison of the public and private sectors shows that second‐generation immigrants are not treated equally in both sectors. A wage gap is observed between workers of French origin and those of Southern European origin. The wage differential between workers of French and North African origins is mostly explained by observable variables.     

Efficient bargaining,welfare and strategic export policy

We present an efficient bargaining model and analyse the welfare effects of unionization, where rival exporting governments employ strategic export policy. The domestic firm is unionized and conducts a Nash bargain with its union to determine wage and employment. The union may be wage oriented, wage neutral or employment oriented. The foreign firm is non-unionized. Stability of the reaction function equilibrium in policy space is sufficient for the following results: (i) domestic welfare increases with the degree of wage orientation; (ii) an increase in the union's bargaining power leads to higher (lower) domestic welfare if the union is wage (employment) oriented; (iii) if the domestic social marginal cost of labour is less than or equal to the foreign marginal cost, domestic market share is higher under wage orientation.     

Mind the Gender Wage Gap – the Impact of Trade and Competition on Sectoral Wage Differences

This paper examines differences between women’s and men’s wages in 18 selected OECD countries in the period 1970 to 2005. The study is based on 12 manufacturing sector‐ and skill‐specific sets of panel data on the gender wage gap. We apply a system generalised method of moments (GMM) estimator to the extended version of the conditional gender wage gap convergence equation, controlling for sector concentration and industry‐specific measures of openness using a difference‐in‐difference approach: trade‐affected concentrated sectors versus trade‐affected competitive sectors. The results indicate that: (i) an increase in sector concentration is associated with wage gap growth; (ii) both import and export penetration are associated with a reduction of the high‐skill gender wage gap growth in concentrated industries; (iii) there is evidence of a widening impact of trade on the medium and low‐skill occupational gender wage gap growth in less competitive industries; (iv) institutional regulations of the labour market have an impact on the development of the gender wage gap: for highly‐skilled labour an increase in labour market regulation raises the growth of the gender wage gap, while for medium‐ and low‐skilled workers, it lowers it.     

Beyond Border Barriers: The Liberalisation of Services Trade in Tunisia and Egypt

Tunisia and Egypt have both recently undertaken significant steps toward trade reform. They have committed to a partnership agreement with the European Union. Both countries have also joined the WTO and are participating in Doha Round discussions on the liberalisation of non‐tariff barriers on both goods and services trade. These developments provide an interesting context within which to investigate not only the changes in welfare associated with reforms affecting the trade in goods, but also the impacts of services liberalisation. Using open‐economy computable general equilibrium models for both Tunisia and Egypt, this paper explores the reasons why structural differences in these two economies imply different opportunities and challenges with trade reform and services liberalisation. The gains from eliminating barriers at the border for goods trade are significantly greater for Tunisia than Egypt. Both countries, however, gain substantially from liberalisation of foreign direct investment in services. Furthermore, economic growth is more evenly distributed across sectors than with liberalisation of trade in goods alone. In addition to reporting on the impact of alternative policies on income, output, employment and trade, sector‐level effects are also considered.     

Liberalising Trade in the Agriculture Sector of a Small Island State: The Case of Fiji

This paper uses Fiji as a case study to investigate the impacts of three trade liberalisation policies – removal of sugar price subsidies, unilateral trade liberalisation and multilateral trade liberalisation, implied by the successful completion of the Doha Round. Removal of the sugar price subsidies has an adverse effect on real output, real national welfare and employment, but promotes growth of non‐agricultural exports in the long run. Unilateral trade liberalisation, in the form of tariff cuts in the agricultural sector, increases real output, real national welfare and non‐agricultural exports in the medium term. However, this growth is not sustained in the long term. The best outcome for Fiji is multilateral trade liberalisation which increases real output, real national welfare, non‐agricultural exports and employment. It is argued that reform of trade policies in less developed countries could come at a cost, therefore highlighting the need for compensating mechanisms to deal with the adverse impacts. Other measures to assist farmers to expand output in response to a rise in prices could include measures to reduce transport, storage and packaging costs, as well as institutional measures to enhance the functioning of input and factor markets.     

Assessing the Benefits to Developing Countries of Liberalisation in Services Trade

This paper discusses the potential impacts of services trade liberalisation on developing countries and reviews existing quantitative studies. Its purpose is to distill themes from current literature rather than to advocate specific policy changes. The picture emerging is one of valiant attempts to quantify in the presence of formidable analytical and data problems yielding only a clouded image of likely impacts on trade, consumption, production and welfare emerging to the point that the policy implications of results are not always clear. A central intuition would seem to be that with genuine two‐sided (OECD/non‐OECD) liberalisation in services that are seemingly considerably labour‐intensive in delivery, the potential should be there for significant developing country gains from global liberalisation allowing full cross‐border delivery. However, this picture is neither fully endorsed by available studies, neither is it explicitly contradicted. This seems to be the case for a number of reasons. One difficulty with the studies is that the conceptual underpinnings of what determines trade in services and how this trade differs analytically from that of trade in goods (if at all) is an issue prior to assessments of impacts of liberalisation of trade in services on developing countries being discussed. Key issues here are the treatment of mobility for service providers (both firms and workers), and the differing analytical structures needed to analyse individual service items (banking, insurance, telecoms, etc.). Some recent analytical work suggests that liber‐alisation in some service items, such as banking, need not always yield gains, and this contrasts with quantitative studies where analytical structures mirror conventional trade in goods treatments. The discussion and measurement of barriers to service trade in both developed and developing countries is also problematic. One is talking of domestic regulation, entry barriers, portability of providers, competition policy regimes more so than only barriers at national borders, as with tariffs. Both representing and quantifying such barriers raise major difficulties, and these are also spelled out in the paper. Which barriers actually restrict trade, and which do not because they are redundant is one issue, for instance. It is also often misleading to represent barriers in simple ad valorem equivalent form. As a result, numerical modelling work on the effects of service trade barriers which is based on ad valorem equivalent modelling is often not fully convincing. In addition, individual country results vary considerably across studies in ways that it is frequently hard for outsiders to understand. Studies do, however, point towards a tentative conclusion that effects are small and positive for developed and most developing countries if FDI flow changes accompanying service trade liberalisation are excluded from the analysis, but much larger and more variable across countries if they are present. This could be taken to suggest that mode 3 GATS liberalisation (roughly captured in some studies) might be important for developing countries; but mode 4 GATS liberalisation could be even more important given large barriers to labour flows across countries. Thus, if service trade liberalisation is thought of primarily as a surrogate for improved functioning of global factor markets in which more capital flows to developing countries and more labour flows from them to developed countries, then developing countries could benefit in a major way from genuine two‐sided (OECD/non‐OECD) liberalisation. Developing countries fear, however, that in global negotiations on services liberalisation where there is an asymmetry of power that largely one‐sided liberalisation may be the outcome, and their gains will be correspondingly limited. The paper concludes by evaluating econometric studies on linkage between services liberalisation and country growth rules, and briefly discusses some key sectoral issues in health services and transportation.     

Globalisation and Poverty in Latin America: Some Channels and Some Evidence

This paper provides an overview of the main mechanisms through which globalisation can affect poverty and household welfare in Latin America and presents supporting evidence from different case studies in the region. One case study explores the impacts of agricultural trade liberalisation in world markets on poverty in Argentina, with an emphasis on labour income effects via real wages. The second case study examines the impacts of CAFTA on net producers and net consumers among the indigenous population in Guatemala. The analysis explores short‐run impacts as well as medium‐run impacts as households adjust farm decisions. Finally, a last exercise is set up to study the role of agricultural liberalisation on wages, employment and unemployment when there are frictions in labour markets. These case studies show that the impacts of trade on developing countries are heterogeneous. In Argentina, there are gains from liberalisation of world agriculture and higher food prices. In Guatemala, instead, the indigenous population would benefit from lower food prices. It is clear that household adjustments and complementary factors are fundamental ingredients of any reasonable evaluation of the welfare impacts of trade reforms.     

最低工资对我国就业性别差异的影响研究——基于中国省际面板数据和行业面板数据的分析

文章基于中国1996-2012年省际面板数据和城镇单位行业面板数据,在控制了教育、劳动供给、经济开放、经济发展、就业环境和时间等因素后,考查了相对最低工资和绝对最低工资的提升对城镇单位就业性别差异的影响。结果表明,最低工资对就业性别差异的影响存在自我修正机制,当期影响与滞后影响方向相反;相对最低工资的综合影响以正向为主,但影响较微弱,绝对最低工资的影响主要体现在滞后效应中,综合影响以负向为主;在高工资行业和女性就业集中度较低的行业中,相对最低工资的当期影响存在一致的负向性、滞后影响以正向为主,绝对最低工资的当期影响以负向为主、滞后影响以正向为主;在女性就业集中度较高的行业中绝对工资的滞后影响以负向为主。