Trade Liberalization and Labor Market Adjustment in Brazil

Nina Pavcnik · Andreas Blom · Pinelopi Koujianou Goldberg · Norbert Schady

37 citations0/0 files storedWorld Bank, Washington, DC eBooks

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Global trade and economics Labor market dynamics and wage inequality Economic Theory and Policy

Abstract

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 inBrazil 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.

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References

1999Does Trade Cause Growth?2002Technical Change, Inequality, and the Labor Market 2002Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants 1988Efficiency Wages and the Inter-Industry Wage Structure 1997Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras 1996Trade in ideas Patenting and productivity in the OECD 1997Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom 1999Who Gains from Trade Reform? Some Remaining Puzzles

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