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

National Bank of Belgium Working Paper No. 214

49 Pages Posted: 12 Apr 2011

See all articles by Philip Du Caju

Philip Du Caju

National Bank of Belgium

Francois Rycx

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA); IZA Institute of Labor Economics

Ilan Tojerow

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: April 2011

Abstract

In the last few decades, international trade has expanded not only between industrialised countries, but also 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 exports and imports on changes in wage differentials, ii) analyse the impact of imports according to the country of origin. Looking at the export side, we find a positive effect of exports on the industry wage premium. The findings also show that import penetration from low-income countries has a significant and negative impact on inter-industry wage differentials, while imports from high-income countries seem to have a more ambiguous impact on the wage structure. The results suggest that trade with low-income and high-income countries has different effects on inter-industry wage differentials.

Keywords: wage structure, inter-industry wage differentials, international trade, matched employer-employee data

JEL Classification: F16, J31

Suggested Citation

Du Caju, Philip and Rycx, François and Tojerow, Ilan, Wage Structure Effects of International Trade: Evidence from a Small Open Economy (April 2011). National Bank of Belgium Working Paper No. 214, Available at SSRN: https://ssrn.com/abstract=1806888 or http://dx.doi.org/10.2139/ssrn.1806888

Philip Du Caju (Contact Author)

National Bank of Belgium ( email )

Research Department
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Belgium

François Rycx

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA) ( email )

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Brussels, B-1050
Belgium
+32 0 2 6504110 (Phone)
+32 0 2 6503825 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ilan Tojerow

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA) ( email )

Ave. Franklin D Roosevelt, 50
Brussels, B-1050
Belgium

HOME PAGE: http://homepages.ulb.ac.be/~itojerow/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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