The objective of the paper is to answer an often-asked question : if tariff rates are reduced, what will happen to wage inequality ? We consider two types of wage inequality : between occupations (skills premium), and between industries. We use two large data bases of wage inequality that have become recently available and a large dataset of average tariff rates all covering the period between 1980 and 2000. We find that tariff reduction is associated with higher inter-occupational and inter-industry inequality in poorer countries (those below the world median income) and the reverse in richer countries. The results for inter-occupational inequality though must be treated with caution.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11046.
Length: Date of creation: Jan 2005 Date of revision: Publication status: published as Branko Milanovic, Lyn Squire. "Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence," in Ann Harrison, editor, "Globalization and Poverty" University of Chicago Press (2007) Handle: RePEc:nbr:nberwo:11046
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Find related papers by JEL classification: F1 - International Economics - - Trade F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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