Working Paper: NBER ID: w11046
Authors: Branko Milanovic; Lyn Squire
Abstract: 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.
Keywords: Tariff Reduction; Wage Inequality; Globalization; Trade Policy
JEL Codes: F1; F13; D31; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tariff reduction (F13) | Increased interoccupational wage inequality in poorer countries (F66) |
| Tariff reduction (F13) | Increased interindustry wage inequality in poorer countries (F66) |
| Tariff reduction (F13) | Decreased wage inequality in richer countries (F66) |
| Global trade dynamics (F19) | Deterioration in economic positions of non-globalizing countries (F69) |