46 Pages Posted: 20 Apr 2016
Date Written: October 2002
The authors study the impact of the 1988-94 trade liberalization in Brazil on wage distribution. They explore three main channels through which trade liberalization could have affected wage distribution: (1) increasing returns to skilled workers because of Hecksher-Ohlin adjustments to trade policy; (2) trade-induced skill-biased technological change; and (3) changes in industry wage premiums. The results suggest that trade reform in Brazil did contribute to the growing skill premium through skill-biased technological change, which was partially instigated by increased foreign competition. The authors also find that sector-specific returns to skill increased more in sectors with bigger tariff reductions. But they find little support for Hecksher-Ohlin type adjustments to trade reform. Overall, the effects of trade reform on wage inequality seem relatively small.
This paper - a product of the Poverty Sector Unit, Latin America and the Caribbean Region - is part of a larger effort in the region to understand the effects of globalization on inequality in developing countries.
Suggested Citation: Suggested Citation
Pavcnik, Nina and Blom, Andreas and Goldberg, Pinelopi and Schady, Norbert, Trade Liberalization and Labor Market Adjustment in Brazil (October 2002). World Bank Policy Research Working Paper No. 2982. Available at SSRN: https://ssrn.com/abstract=636344