Download Trade liberalization and wage inequality: empirical

Globalization and Interoccupational Inequality in a
Panel of Countries: 19832003
Farzana Munshi
Department of Economics
University of Gothenburg, Sweden
Background
 Large interest on globalization, poverty
and inequality.
 Globalization bring long-run benefits to
participating countries.
 But globalization creates concern about
distributional consequences.
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Background, cont’d
 Globalization has many dimensions….
 Openness to trade, the HOS prediction
 Openness to capital
 Outsourcing
 Immigration
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Background, cont’d
 Evidence of increased wage and income
inequality in many developed countries.
 Mixed evidence for developing countries.
 Is globalization responsible?
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Background, cont’d
 Skilled-biased technical change
(computerization, IT revolution)
 Labor market institution
 Informal sector
 Factor endowment
 Different data, methodology
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Purpose
 How does globalization (openness to
trade & capital) affect inter-occupational
wage inequality within countries?
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Data/variable
 52 countries,21 time series observations.
 Developed (15), Developing (37)
 Occupational wages from the OWW
(Freeman and Oostendorp,2000).
 Country-occupation-time matrix; 150+
countries,163 occupations, 21 years.
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Data/variable
 Occupational wage inequality
 ISCO-88, ISCED-76
 34 occupations; 19 skilled, 15 unskilled
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Econometric analysis
 Dependent variable- Relative wages
 Explanatory variables

Trade, FDI, GDP per capita, past relative
wages
Measure for technical change, supply
effect not covered due to lack of data
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Econometric analysis
 Present result estimating several
models:OLS, fixed effects, 2SLS,GMM.
 Dynamic fixed effects preferable
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Results
 Openness to trade contributes to an
increase in occupational wage inequality
within developed countries, but effect
diminishes with increased level of
development.
 Openness to trade has insignificant
impact on wage gap within developing
countries.
 Openness to capital (FDI) has
insignificant impact on either type of
country.
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 Thank you!
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