Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence

The objective of the paper is to answer an often asked question: If tariff rates are reduced, what will happen to wage inequality? The authors consider two types of wage inequality: between occupations (skills premium) and between industries. They use two large databases of wage inequality that have...

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Bibliographic Details
Main Authors: Milanovic, Branko, Squire, Lyn
Format: Policy Research Working Paper
Language:English
Published: World Bank, Washington, DC 2012
Subjects:
GDP
OIL
Online Access:http://documents.worldbank.org/curated/en/2005/04/5758504/tariff-liberalization-increase-wage-inequality-some-empirical-evidence
http://hdl.handle.net/10986/8980
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Summary:The objective of the paper is to answer an often asked question: If tariff rates are reduced, what will happen to wage inequality? The authors consider two types of wage inequality: between occupations (skills premium) and between industries. They use two large databases of wage inequality that have recently become available and a large data set of average tariff rates covering the period between 1980 and 2000. The authors 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. However, the results for inter-occupational inequality must be treated with caution.