Trade Liberalisation and Wages in Developing Countries

36 Pages Posted: 17 Oct 2003

See all articles by Jorge Arbache

Jorge Arbache

University of Brasilia - Department of Economics

Andrew P. Dickerson

University of Warwick - Institute for Employment Research (IER)

Francis Green

University of Kent - Department of Economics

Multiple version iconThere are 3 versions of this paper

Abstract

This paper first reviews theoretical and empirical studies of the effects of trade liberalisation on wages in developing countries. It then presents new evidence for the case of Brazil which experienced a period of rapid trade liberalisation at the beginning of the 1990s. Conditional on education and work experience, we find that wages fell substantially in the traded sector after trade liberalisation. This is consistent with there being reduced rents as industries faced greater competition. Conditional wages also fell, though by a smaller amount, in the non-traded sector, possibly reflecting spill-over effects. However, due to increasing education levels, there was little overall change in the average wage level for the whole economy.

Averaged over the whole post-liberalisation period, there was an increase in the marginal returns to college education. Within the traded sector, the impact of increasing openness on wages was insignificant for those in the top two education groups, but negative for lower level education groups. These findings are consistent with the hypothesis that, following trade liberalisation, imported technology raises the relative demand for highly skilled labour.

Keywords: trade liberalisation, technology, wages, employment, income distribution, developing countries, returns to education, Brazil

JEL Classification: J3, J6, J31, F16, D33, O15

Suggested Citation

Arbache, Jorge and Dickerson, Andrew P. and Green, Francis, Trade Liberalisation and Wages in Developing Countries. Available at SSRN: https://ssrn.com/abstract=447141 or http://dx.doi.org/10.2139/ssrn.447141

Jorge Arbache (Contact Author)

University of Brasilia - Department of Economics ( email )

Campus Universitário Darcy Ribeiro
Asa Norte
Brasília, Distrito Federal 70910-900
Brazil
+ 55 61 8194 4529 (Phone)

Andrew P. Dickerson

University of Warwick - Institute for Employment Research (IER) ( email )

Coventry CV4 7AL
United Kingdom

Francis Green

University of Kent - Department of Economics ( email )

Keynes College
Kent, CT2 7NP
United Kingdom

HOME PAGE: http://www.kent.ac.uk/economics/staff/gfg/

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