Have Falling Tariffs and Transportation Costs Raised U.S. Wage Inequality?

29 Pages Posted: 7 Aug 2012

See all articles by Jonathan Haskel

Jonathan Haskel

Imperial College Business School; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Matthew J. Slaughter

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Date Written: February 2000

Abstract

A number of studies have tried to gauge the effect of international trade on the rising U.S. skill premium by examining whether product prices in unskill-intensive sectors have fallen relative to prices in skill-intensive sectors. However, these studies do not estimate what share of domestic product-price changes is due to trade barriers. This paper attempts to address this issue by analyzing not the sector bias of price changes but rather the sector bias of price changes induced by changes in U.S. tariffs and transportation costs. We find that in both the 1970s and 1980s, level cuts in tariffs and transportation costs levels were concentrated in the unskill-intensive sectors. If pass-through of trade barriers to product prices is uniform across all sectors, then this suggests falls in tariffs and transportation costs were mandating a rise in the U.S. skill premium. But despite this suggestive evidence, we estimate that the price changes induced by tariffs or transportation costs mandated a rise in the skill premium that was mostly statistically insignificant. Thus, we do not find strong evidence that falling tariffs and transport costs, working through price changes, mandated rises in inequality.

Suggested Citation

Haskel, Jonathan and Slaughter, Matthew J., Have Falling Tariffs and Transportation Costs Raised U.S. Wage Inequality? (February 2000). NBER Working Paper No. w7539. Available at SSRN: https://ssrn.com/abstract=215775

Jonathan Haskel (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom
020 7594 8563 (Phone)
020 7594 5915 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Matthew J. Slaughter

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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