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 and wage differentials in Taiwan

Abstract

The ease of restrictions on foreign direct investment in China since 1990 has attracted a continuous and dramatic flow of outward investment from Taiwan to the mainland. At the same time, the relative wages for skilled workers in Taiwan have risen mildly despite a rapid increase in the share of educated workers in its labor market. The aim of this paper is to explore the linkage between capital outflows to China and the wage share of skilled workers in Taiwan over the period 1991 – 2001. We find that the pattern of changes in relative wages is consistent with shifts in the relative demand for skilled labor. For the most part, the increases in the relative demand for skilled workers could be attributable to within-industry factors. Findings also indicate that outward direct investment to China has a significantly positive impact on the skilled labor wage share.     

Productivity, indexation and macroeconomic outcomes: The implications of goods market competition and wage bargaining structure

One strand of the macroeconomics literature explores the extent to which the indexation of nominal wages to a variable in addition to the price level can improve macroeconomic performance. The present paper contributes to this literature by developing a model in which the nominal wage is indexed not only to the price level but also to productivity. Two key features of the framework are a monopolistically competitive goods market and a unionized labor market in which wages are determined by a finite number of unions. A significant finding is that the multiparameter indexation scheme generally outperforms full-information wage setting.     

Trade liberalization, wage inequality, and endogenously determined nontraded goods

We examine the boundary between traded and nontraded goods as a channel for trade to impact factor prices. In a two-country, two-factor, continuum-good model, tariffs generate a range of nontraded goods. A tariff reduction has a direct effect to expand a country’s import set and an indirect effect through terms of trade to expand its export set. We show that the export expansion can dominate the import expansion, raising the relative demand for the factor intensively used in production. The result is useful in explaining observed rising wage inequality in developing countries following trade liberalization.     

Economic liberalisation,gender wage inequality and welfare

The article develops a 3-sector general equilibrium model appropriate for economies with female labour oriented export sector to examine the effects of economic liberalisation policies on gender based wage inequality. It is assumed that there exist disparities in efficiencies between male and female labour due to skewed access to education and health, and differences in their spending patterns leading to differential effects of respective wages on their nutrition. The results indicate that tariff cut may reduce gender wage inequality, but may have detrimental effects on welfare; while foreign capital inflow may accentuate the inequality, despite improving the welfare of the economy. However, government policies to increase the provision of education and health have favourable effects on gender wage inequality but may be welfare deteriorating. Thus, the article provides a theoretical explanation to empirical evidences of diverse effects of liberalisation on gender wage inequality and explains the possibility of a trade-off between gender inequality and social welfare.     

Game theory and the practice of bargaining

This article seeks to examine the insights for practice that can be obtained from the recent work in explicit, extensive-form models of bargaining. I discuss the results of the theory and compare them to the advice often given to practitioners. Also included are sections on criticisms of these models and possible responses.     

Gibrat,Galton and Job Generation

The proportionate growth of a company decreases with increases in its initial size, in accordance with the Galton model of regression towards the mean. Gibrat's Law of proportionate effect does not hold within size classes or within industries. In job generation accounting, actual increases in employment are even more important than proportionate ones. In the UK small and medium sized companies had larger absolute and proportionate increases in employment than did large companies and were responsible for most of the increase in jobs 1989-93. In fact large companies tended to reduce the numbers they employed.     

Relative prices and wage inequality: evidence from Mexico

This paper examines the link between relative goods prices and relative wages during two periods of Mexico's trade liberalization. The relative price of skill-intensive goods rose following Mexico's entrance to the General Agreement and Tariffs and Trade (GATT) in 1986, but fell after Mexico entered the North American Free Trade Agreement (NAFTA) in 1994. This paper adds a band pass filter to two established techniques to compare the relationship between prices and wages. Results from all three approaches are consistent with a positive long-run relationship between relative output prices and relative wages. The band pass filter results suggest that the relevant time frame for the relationship begins after 3-5 years.     

Public pollution abatement and wage inequality

This paper constructs three-sector general equilibrium models to investigate how public pollution abatement affects the skilled–unskilled wage inequality. In the basic model with full employment, we find that a higher degree of public pollution abatement will decrease the wage inequality if the intensity of skilled labor in the urban skilled sector is sufficiently large and expand or narrow down the wage gap if this intensity is sufficiently small. In the extended models, we consider other four cases, and obtain the results similar or dissimilar to that of the basic model.     

Strategic trade policy and union-firm bargaining agenda

In this paper, we revisit the issue of the scope of bargaining between duopolistic firms and unions in an open economy with strategic trade policy. It is shown that, in contrast with the case of the absence of export tax/subsidy, a right-to-manage (RTM) arrangement always emerges endogenously as a sub-game perfect Nash equilibrium in agreement between parties. Moreover, such an arrangement may be also Pareto-optimal in both exporting countries in the sense that profits, workers' welfare (provided that union's power is sufficiently high) and social welfare as a whole are higher than the efficient bargaining (EB) arrangement. Moreover, since the government of the country in which there is EB (while in the other country the alternative agenda RTM is used) levies a tax on export, then the conventional result that under quantity competition it is always optimal for exporting countries to subsidise exports may be reversed.     

Trade,growth and wage inequality in Bangladesh

Abstract

Using model selection techniques based on out-of-sample predictive ability criterion in a Vector Autoregression (VAR) framework, this paper empirically examines the causal relations among growth, trade, and wage inequality in Bangladesh between 1971 and 2000. There is some evidence of bi-directional causality between growth and inequality and between trade and growth. That growth causes trade and that trade causes inequality are robust results. Furthermore, evidence strongly suggests that investment is important for trade, and the terms of trade between agricultural products and manufacturing products is an important causal determinant of both growth and trade.     

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.     

贸易自由化对工资差距的影响及作用机制--基于中国制造业企业的实证研究

本文利用世界银行的中国企业调查数据分析贸易自由化对工资差距的影响,结果表明贸易自由化显著提升企业内工资差距。企业进口投入品的行为使其内部普通员工的最高与最低工资之比提高约50％,总经理与中层经理的工资比提高约30％,中层经理与普通员工的工资比提高约12％－20％。进一步分析表明,自由贸易使企业对高技能劳动力的需求更大,更倾向于采用绩效工资、进行研发投资、提供员工培训和使用计算机,这些因素均导致工资差距的上升。     

The macroeconomics of commercial policy and the trade balance: A policy perspective

Given the continuing growth of foreign direct investment (FDI) in the United States, there is a growing interest in examining its impact on the rate of economic growth. The immense literature on economic growth in the United States is composed of studies that concentrate on measuring the domestic variables that affect U.S. economic growth. However, the impact of foreign direct investment on the economic growth of the United States has not received the attention that is deserves. The purpose of this study is: (1) to examine the determinants of economic growth in the United States over time, and (2) to see if there is any time-series support for the FDI-led growth hypothesis in the United States. To achieve these goals the study uses a model that is based on the postulates of de Mello. Employing a 40-year period of annual data, the model is estimated by using the Beach Mackinnon technique which corrects for autocorrelation. The estimation results suggest the following conclusions: 1. The major determinants of economic growth in the United States are total factor productivity growth, domestic investment growth, and foreign direct investment growth. 2. Causal relationships between foreign direct investment growth and economic growth is uni-directional, running from foreign direct investment to economic growth. 3. Causal relationships between foreign direct investment growth and total factor productivity growth is uni-directional, running from foreign direct investment to total factor productivity. These findings suggest that foreign direct investment growth has a significant impact on the United States economic growth. Additionally, foreign direct investment has a significant impact on total factor productivity in the United States, further contributing to the United States’ economic growth. This calls on the U.S. policy makers to devise policies that are conducive to increasing the amount of foreign direct investment in this country.     

市场潜力、贸易自由化与地区工资差距

在新经济地理学的框架下,本文构建理论模型研究市场潜力和贸易自由化与地区工资差距的关系,根据中国1993－2012年的省际面板数据,采用工具变量二阶段最小二乘法实证检验市场潜力和贸易自由化对地区工资水平的影响效应。研究结果表明,市场潜力和贸易自由化对地区工资水平均有显著为正的影响作用,且二者还存在替代关系。进一步的分析发现,贸易自由化程度较高的沿海地区,其市场潜力对地区工资水平的影响较小,而在内陆地区则恰好相反。     

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.     

Quid pro quo and the enforcement of intellectual property rights protection: A bargaining approach

This article models a North–South negotiation where the North provides a quid pro quo in exchange for the strengthening of the enforcement of intellectual property rights (IPR) protection in the South. We show that when Northern and Southern firms compete on quantity in the Southern market, the South's optimal choice is either complete protection or complete violation, irrespective of different levels of IPR protection being available. We show this to depend on the Southern government's valuation of the quid pro quo and the Northern firm's level of technology.     

Household savings and present bias among Chinese couples: A household bargaining approach

Family savings is crucial to long-term wellbeing for all members in a household, particularly in a Chinese context where costs of living increasingly shift from government to individuals. Savings are typically examined as a balance of financial behaviors and spending preferences; however, this study highlights how savings in a family context is also a function of relationship status. Drawing on intra-household bargaining models, we analyze data from the 2014 China Family Panel Studies to examine the extent to which men's and women's relative power in the household explain variation in savings levels across families. Our findings indicate that women's greater bargaining positions (e.g., income and assets) correspond with greater savings for the family. However, such bargaining power constitutes a net negative for family savings when women have both greater relational power and higher spending preferences. We suggest that family savings can and should be understood as an outcome of dynamic bargaining conditions in addition to income factors.     

A study of living wage effects on employees' performance‐related attitudes and behaviour

Despite the surge of interest in living wage research, most studies pay little attention to the effect of living wages on employee attitudes and behaviour. We examine the differences between living wage and minimum wage workers on three attitudinal and behavioural outcomes: affective commitment, organizational citizenship behaviour (OCB), and turnover intention. We also examine the effects of training and benefits on the three outcomes. Results show that living wage workers have higher affective commitment and lower turnover intention. Training and benefits also improve workers' attitudinal and behavioural outcomes variously. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Job satisfaction and commitment in the entrepreneurial SME

In the current global corporate climate that surrounds us, firms would do well to encourage the talent and creativity of their employees to achieve success. This is achieved, not by giving priority to individual talent, but by optimizing the collective as a whole and with the firm’s activities based on teamwork and joint effort. Heads of organizations might benefit from creating a favorable context for the birth and growth of collective internal cooperation, which is understood to be the collective ability to create and innovate on the part of the team, the firm or the organization. Having contrasted our hypotheses through research on Spanish firms, we have concluded that job satisfaction and commitment to the team are factors that have a direct and positive effect on Internal Entrepreneurship.