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Trade Effects on Wage Inequality through Worker and Firm Heterogeneity in Japan

Author

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  • Masahiro Endoh

    (Faculty of Business and Commerce, Keio University)

Abstract

This study estimates the trade effect on wage inequality of Japanese manufacturing workers, with consideration of worker and firm heterogeneity. Parameters are obtained from regression results of hourly wage by using constructed worker-establishment panel data. Estimated wage effects differ largely by trade indexes, and the logarithmic real trade value is assessed to be a more appropriate measure for trade in this study. The estimated wage change is positively larger for higher-paid workers, who are employed by larger firms in industries of which Japan has a comparative advantage, while it is negatively larger for lower-paid workers. It implies that wage inequality between industry-size-skill groups is increased by international trade in Japan. However, the actual evolution of wage inequality during 1998-2013 is not successfully explained by the predicted change of wage inequality from international trade. International trade has a potential to widen wage inequality, but its effect is marginal for actual wage inequality compared with other economic and social shocks.

Suggested Citation

  • Masahiro Endoh, 2020. "Trade Effects on Wage Inequality through Worker and Firm Heterogeneity in Japan," Keio-IES Discussion Paper Series 2020-017, Institute for Economics Studies, Keio University.
    • Handle: RePEc:keo:dpaper:2020-017
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    File URL: https://ies.keio.ac.jp/upload/pdf/en/DP2020-017.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Firm heterogeneity; Skill premiums; Wage inequality; Worker heterogeneity;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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