Trade boom and wage inequality: evidence from Ugandan districts

Massimiliano Calì

Journal of Economic Geography, 2014, vol. 14, issue 6, 1141-1174

Abstract: The process of economic integration over the past two decades has been accompanied by expanding skilled wage premia—a key measure of wage inequality—in most countries. This was also the case for Ugandan wage employees during the 1990s, a period of abrupt trade opening, market reforms and improved relations with neighbouring Kenya. As in other unskilled labour abundant countries, this is a surprising result in light of the standard Heckscher–Ohlin (H–O) framework. By using a novel district-level analysis, I find that in fact increased trade reduced wage inequality in line with the H–O predictions. During the 1990s districts more exposed to the trade boom experienced a rise in wage premia 2.8 percentage points lower relative to less-exposed districts. On the other hand, the intensification of domestic trade across districts and the increase in average education were associated with increased wage premia during the period of analysis.

Date: 2014
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