Working Paper: NBER ID: w18106
Authors: Chinhui Juhn; Gergely Ujhelyi; Carolina Villegas-Sanchez
Abstract: This paper studies the effect of trade liberalization on an under-explored aspect of wage inequality - gender inequality. We consider a model where firms differ in their productivity and workers are differentiated by skill as well as gender. A reduction in tariffs induces more productive firms to modernize their technology and enter the export market. New technologies involve computerized production processes and lower the need for physically demanding skills. As a result, the relative wage and employment of women improves in blue-collar tasks, but not in white-collar tasks. We test our model using a panel of establishment level data from Mexico exploiting tariff reductions associated with the North American Free Trade Agreement (NAFTA). Consistent with our theory we find that tariff reductions caused new firms to enter the export market, update their technology and replace male blue-collar workers with female blue-collar workers.
Keywords: Trade liberalization; Gender inequality; Wage inequality; NAFTA; Mexico
JEL Codes: F1; J2; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tariff reductions from NAFTA (F15) | New firms enter the export market (F10) |
| New firms enter the export market (F10) | Modernization of technology (O14) |
| Modernization of technology (O14) | Enhanced productivity of female workers in blue-collar jobs (J29) |
| Enhanced productivity of female workers in blue-collar jobs (J29) | Increased ratio of female blue-collar workers to male blue-collar workers (J79) |
| Enhanced productivity of female workers in blue-collar jobs (J29) | Increased relative wage of female blue-collar workers (J79) |