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Trade Liberalization and Wage Inequality: Evidence from the U.S. States

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  • Xiaofeng Penny Li

    (International School of Economics and Management, Capital University of Economics and Business, Beijing 100070, China)

Abstract

This paper examines the relationship between trade liberalization and wage inequality for 50 U.S. states during the period from 1999 to 2008. The Difference-in-Differences and fixed effects methods are employed to evaluate the effect of trade liberalization on wage inequality in the U.S. states. Empirical results reveal that trade liberalization and de-unionization do increase the wage inequality between skilled and unskilled workers. Evidence shows skill-biased technological change has no significant impact on rising wage inequality. As Difference-in-Differences estimation on time-series cross sectional data involves many years, the conventional standard errors often understate the standard deviation of the estimators. This paper employs the standard bootstrapping procedure and the clustering error procedure to correct the problem, and all sign patterns still hold.

Suggested Citation

  • Xiaofeng Penny Li, 2015. "Trade Liberalization and Wage Inequality: Evidence from the U.S. States," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 10(3), pages 527-539, September.
    • Handle: RePEc:fec:journl:v:10:y:2015:i:3:p:527-539
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-004-015-0023-9
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    More about this item

    Keywords

    trade liberalization; wage inequality; skill-biased technological change; de-unionization;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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