Trade Liberalisation Does Not Always Raise Wage Premia: Evidence from Ugandan Districts

SERC Discussion Paper No. 114

45 Pages Posted: 2 Jul 2012

See all articles by Massimiliano Calì

Massimiliano Calì

Overseas Development Institute (ODI)

Date Written: June 30, 2012

Abstract

The process of economic integration over the past two decades has been accompanied by an expanding income wedge between skilled and unskilled workers in many developing countries. This was also the case for Ugandan wage employees during the 1990s, which was a period of abrupt trade opening and market reforms. This is a surprising result for an unskilled labor abundant country like Uganda in light of a standard Heckscher-Ohlin (H-O) framework. But was the trade opening responsible for the increase in wage premia? By using a novel district-level analysis, I find that in fact increased trade reduced the returns to schooling in line with the H-O predictions. On the other hand, the intensification of domestic trade across districts during the period was associated with higher returns in those districts relatively endowed with skilled employees. This effect appears to be responsible for at least some of the rising returns to schooling among wage employees in Uganda.

Keywords: returns to education, wage inequality, Uganda, trade, market reforms

JEL Classification: F10, F14, F16, O12, O15

Suggested Citation

Cali, Massimiliano, Trade Liberalisation Does Not Always Raise Wage Premia: Evidence from Ugandan Districts (June 30, 2012). SERC Discussion Paper No. 114. Available at SSRN: https://ssrn.com/abstract=2097481 or http://dx.doi.org/10.2139/ssrn.2097481

Massimiliano Cali (Contact Author)

Overseas Development Institute (ODI) ( email )

111 Westminster Bridge Road
London
United Kingdom

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