Sectoral and regional impacts of trade liberalization on the skilled-unskilled wage-gap in Pakistan

Abstract

This study explores the impacts of trade liberalization on the skilled-unskilled wage gap (henceforth SUSWG) by using the micro-level data of Pakistan. It is generally believed that when economies are liberalized, the SUSWG increases, especially in poor economies. Our study uses a two-step estimation methodology. We used two measures for SUSWG at sectoral and regional levels. We employed Oaxaca-Blinder decomposition for residual wage-gap, and log-wage-gap. For empirical (i.e., sectoral and regional) analysis, we employed Fixed effects (FE), Random effects (RE) and FE with Driscoll-Kraay Standard Errors (DKSEs), feasible generalized-least-squares (FGLS), and Panel-corrected Standard Errors (PCSE). We used sectoral panel data for sectoral analysis and provincial panel data for regional analysis, using the data from 1990 to 2005. Our study finds that protection rates and SUSWG are associated in Pakistan. Trade liberalization increases the SUSWG. The sectoral and regional analysis reveal similar findings on the impact of liberalization on SUSWG. Moreover, our results are robust and insensitive to various controls, measurement approaches (i.e., the log wage gap and the residual wage gap), and econometric techniques. We also find that lagged tariffs increase the SUSWG. Our findings will provide guidelines for policymakers to make future policies regarding trade liberalization and SUSWG in Pakistan.

Does trade liberalization increase child labor in rural Pakistan? A rural perspective

“…The average tariff rate declined gradually from 1990 (63 percent to 13 percent) to 2005. It shows how import tariffs have decreased over time, and this change reflects Pakistan's discussion with the World Trade Organization (WTO) about achieving national minimum tariffs [15,22,27]. Pakistan liberalized its trade policies gradually by reducing import tariffs and tariff slabs and eliminating non-tariff measures of trading.…”

“…A child who is below or equal to the age of 14 is known as child labor and CL is described as the participation of children between the ages of 10 to 14 in the labor force within the rural regions of Pakistan. Following Jameel, et al [22]; Wu, et al [18]; Ul-Haq, et al [23]; and Ul-Haq, et al [24], we are utilizing the reduction of import tariffs as a proxy of TL to the best of my knowledge, which is a better proxy in comparison to past ones (i.e., trade ratios are used). The Italian expert Corrado Gini made up a measure for income inequality known as the Gini index (GI).…”

“…To empirically study the reduction of import tariffs and the CL using a panel dataset, Following Shi, et al [34], Al-Malki, et al [35], and Jameel, et al [22], we utilized the Feasible Generalized Least Square (FGLS) 2 technique by adopting the share of CL as an explained variable and the import tariff reduction at the province level as the key explanatory variable. We employ the empirical strategy as follows:…”

The impact of trade reforms on industry wage premia in Pakistan: A sectoral perspective

“…These premiums may be incentives for sector rents or incentives for sector-specific talent. While it is true that each sector employs individuals with varying levels of education and skill, disparities in earning premiums reflect differences in the relative earnings of skilled and amateurish workers (Goldberg & Pavcnik, 2005;Jameel, Hina, & Ul-Haq, 2023;Pavcnik et al, 2004).…”

Measuring the factors influencing job satisfaction in the garment industry: Bangladesh perspectives

“…A more favorable work setting and working conditions can help minimize personnel turnover and the costs that go along with it. Employees who are satisfied with their workplace are more likely to adhere to the company's policies and interests (Jameel, Hina, & Ul-Haq, 2023;Özen, Grima, & Hamarat, 2021). They will choose to disregard their own interests and refrain from dishonest behavior, such as fraud, embezzlement, receiving bribes, engaging in corrupt activities, or stealing, to maintain their position (Ayyala et al, 2019).…”