Tariff reductions, trade patterns and the wage gap
(2015) , 48 pages
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- Authors
- Abstract
- This paper studies the impact of trade liberalization on labor market outcomes. First, we find that bilateral trade liberalization does not affect exports towards third countries. To accommodate this novel result, we deviate from existing literature and rely on a three-country monopolistic competition framework with variable elasticity of substitution and vertical linkages in fixed costs. The resulting model predicts that trade liberalization is associated with an increase in the skill-driven wage gap and a reduction in unskilled employment. This prediction is empirically validated using EU-KLEMS data on country-sector wage by skill level on 17 OECD countries from 1996 to 2005.
- Affiliations
European Commission Joint Research Center, Institute for Prospective Technological Studies (IPTS) University of Salento Department of Management, Economics, Mathematics and Statistics, Ecotekne
Citations
Di Comite, F., Nocco, A., & Orefice, G. (2015). Tariff reductions, trade patterns and the wage gap (IRES Discussion Papers 2015-4). https://hdl.handle.net/2078.5/193137