Wage Structure Effects of International Trade: Evidence from a Small Open Economy

Philip Du Caju, Francois Rycx and Ilan Tojerow

No 5597, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In the last decades, international trade has increased between industrialised countries and between high- and low-wage countries. This important change has raised questions on how international trade affects the labour market. In this spirit, this paper aims to investigate the impact of international trade on wage dispersion in a small open economy. It is one of the few to: i) use detailed matched employer-employee data to compute industry wage premia and disaggregated industry level panel data to examine the impact of changes in international trade on changes in wage differentials, ii) simultaneously analyse both imports and exports, and iii) examine the impact of imports according to the country of origin. Looking at the export side, we find (on the basis of the system GMM estimator) a positive effect of exports on industry wage premia. The results also show that import penetration has a significant and negative impact on industry wage differentials whatever the country of origin. However, the country of origin appears to matter quite a lot. Indeed, the detrimental effect of imports on wages is found to be significantly bigger when the latter come from low-income countries than from high-income countries.

Keywords: wage structure; international trade; matched employer-employee data; inter-industry wage differentials (search for similar items in EconPapers)
JEL-codes: F16 J31 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2011-03
New Economics Papers: this item is included in nep-lab and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: Review of World Economics, 2012, 14 (2), 297-331

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Related works:
Working Paper: Wage structure effects of international trade: evidence from a small open economy (2011)
Working Paper: Wage structure effects of international trade: Evidence from a small open economy (2011)
Working Paper: Wage Structure Effects of International Trade: Evidence from a Small Open Economy (2011)
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