Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence

Branko Milanovic and Lyn Squire

in Globalization and Poverty

Published by University of Chicago Press

Published in print April 2007 | ISBN: 9780226317946
Published online February 2013 | e-ISBN: 9780226318004 | DOI:
Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence

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This chapter constructs some measures of both interindustry and interoccupation wage inequality using detailed information on wages across occupations and industries. It shows that globalization, measured using average tariffs, leads to rising inequality in poor countries and falling inequality in rich countries. The effect of liberalization may differ depending on the initial conditions of the liberalizing country. Decreases in protection and increases in occupational wage inequality may be related. Reduction of the average tariff rate will tend to contribute to interindustry inequality more in countries with higher trade union density. The empirical results provide weak support for the hypothesis that a reduction of tariffs tends to be associated with an increase in interoccupational wage inequality and somewhat stronger support that reduction in tariffs is associated with an increase in wage inequality between industries.

Keywords: interindustry inequality; interoccupational wage inequality; globalization; tariffs; liberalization

Chapter.  12654 words.  Illustrated.

Subjects: Economic Development and Growth

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