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Lower Tariff, Rising Skill Premium in Developing Countries: Is it a Coincidence?

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  • Lili Yan Ing

Abstract

Even though there are gains from international trade, there is still a case that trade opportunities have significant distributional consequences. This study considers the arguments that trade liberalisation and technological catch‐up could raise the skill premium. The first argument has shown, in the North–South trade framework, that a reduction in import tariff may raise the skill premium if the tariff reduction causes the range of the traded goods in which export expansion occurs to be greater than the range of the traded goods in which imports expand. The second argument has shown that technological catch‐up could raise the skill premium through export expansion. This paper presents an empirical study of developing economies from 1980 to 2005, which confirms that trade liberalisation raises the skill premium, whilst technological catch‐up has an insignificant effect on the skill premium.

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  • Lili Yan Ing, 2009. "Lower Tariff, Rising Skill Premium in Developing Countries: Is it a Coincidence?," The World Economy, Wiley Blackwell, vol. 32(7), pages 1115-1133, July.
    • Handle: RePEc:bla:worlde:v:32:y:2009:i:7:p:1115-1133
    DOI: 10.1111/j.1467-9701.2009.01192.x
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    References listed on IDEAS

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    1. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
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    3. World Bank, 2006. "World Development Indicators 2006," World Bank Publications - Books, The World Bank Group, number 8151.
    4. Xu, Bin, 2003. "Trade liberalization, wage inequality, and endogenously determined nontraded goods," Journal of International Economics, Elsevier, vol. 60(2), pages 417-431, August.
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    Cited by:

    1. Lili Yan Ing & Miaojie Yu & Rui Zhang, 2016. "Indonesia and China: Friends or Foes? Quality Competition and Firm Productivity," Working Papers DP-2016-29, Economic Research Institute for ASEAN and East Asia (ERIA).
    2. García Muñoz, Teresa María & Milgram Baleix, Juliette & Odeh, Omar Odeh, 2020. "Inequality in Latin America: The role of the nature of trade and partners," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 14, pages 1-35.
    3. Jayanthakumaran, Kankesu & Sangkaew, Piyapong & O’Brien, Martin, 2013. "Trade liberalisation and manufacturing wage premiums: Evidence from Thailand," Journal of Asian Economics, Elsevier, vol. 29(C), pages 15-23.
    4. Mari Pangestu & Lili Yan Ing & Gracia Hadiwidjaja, 2018. "The Future of East Asia’s Trade: A Call for Better Globalization," Asian Economic Policy Review, Japan Center for Economic Research, vol. 13(2), pages 219-238, July.

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