Trade Liberalization and Skill Premium in Chile

Murakami, Yoshimichi

doi:10.32870/mycp.v3i6.418

Cited by 6 publications

(3 citation statements)

References 24 publications

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“…Carnoy (2011) and Carnoy et al (2012) argue that the recent evolution of income distribution in developing countries is mainly attributable to educational expansion, skill-biased technological changes and government policies, including minimum wage policies and trade liberalisation. In the case of Chile, literature reveals that the sharp increase in inequality from the mid-1970s to the 1980s is attributable to skill-biased technological changes (Gallego, 2012), unilateral trade liberalisation (Murakami, 2014) or the deterioration of labour market conditions, including high unemployment and squeeze on real minimum wages (Marcel and Solimano, 1994). Since Chile had already implemented major trade liberalisation by the beginning of the 1990s and enjoyed significant improvements in unemployment and minimum wages in the 1990s and 2000s (Ffrench-Davis, 2010), the increasing supply of workers with higher education is most likely to explain the evolution of income inequality in these periods.…”

Section: Introductionmentioning

confidence: 99%

Expanding higher education and wage inequality in Chile

Murakami

Nomura

2020

JES

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PurposeThis study aims to analyse the contribution of the expansion and diversification of higher education to Chile's increase in wage inequality from 1992 to 2000 and its subsequent decrease from 2000 to 2013.Design/methodology/approachThe wage equation for each year is estimated using data from the national household survey, Encuesta de Caracterización Socioeconómica Nacional (CASEN). Using the method proposed by Firpo et al. (2009), the evolution of wage changes is decomposed into composition and wage structure effects of each explanatory variable at different points of the wage distribution.FindingsThe results show that the positive composition effect of higher education, derived from the increasing share of both workers with university degrees and those with vocational degrees, is substantially larger at the upper quantiles and exceeds the negative wage structure effect, thereby contributing to increasing wage inequality from 1992 to 2000. By contrast, the negative wage structure effect of higher education, primarily derived from the decreasing return to university degrees, is substantially larger at the upper quantiles and exceeds the positive composition effect, thereby contributing to decreasing wage inequality from 2000 to 2013.Originality/valueThis study contributes to the literature by showing that the expansion of higher education increased inequality in the 1990s and decreased it in the 2000s while the increasing supply of workers with vocational degrees decreased wage premiums for university degrees in the latter period.

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Section: Introductionmentioning

confidence: 99%

Expanding higher education and wage inequality in Chile

Murakami

Nomura

2020

JES

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“…We consider that the increase in the relative supply of workers with higher education degrees is insufficient to account for the entire decline in the coefficients of higher education degrees. For example, Murakami (2014) finds the estimated coefficient of the relative supply of college-educated workers to be -0.1652 (i.e., the inverse of the elasticity of substitution between college-educated and unskilled workers) in Chile for the previous period. 11 This estimate predicts that the observed increase in the share of workers with higher education (from 0.342 in 2013 to 0.427 in 2017, see Table 1) leads to a 0.059 log point decrease in the coefficient of higher education.…”

Section: Estimation Resultsmentioning

confidence: 99%

Decline in values of degrees and recent evolution of wage inequality: Evidence from Chile

Murakami,

Nomura

2023

Estudios de Economía

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Using data from nationally and regionally representative household surveys, we analyze the association between the changes in coefficients of dummy variables for higher education degrees in the wage equation and evolution of wage inequality in Chile from 2013-2017. Employing a decomposition method using unconditional quantile regressions, we find that a significant decline in the coefficients of professional degrees, especially from new private universities, with a larger magnitude at upper quantiles, is associated with a substantial reduction in wage inequality. The results are robust to the correction for sample selection bias and control for workers' occupation and firm size categories.

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“…Beyer, Rojas, and Vergara (1999) find that trade openness (the ratio of exports plus imports to GDP) widened the wage inequality between skilled and unskilled workers. Murakami (2014) also finds that tariff reductions widened wage inequality. By contrast, Gallego (2012) finds that technological progress in developed counties widen wage inequality, while trade-related variables are largely insignificant.…”

Section: Introductionmentioning

confidence: 99%

Trade liberalization and wage inequality: Evidence from Chile

Murakami

2021

The Journal of International Trade & Economic Development

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This study analyzes the impacts of further tariff reductions resulting from the proliferation of regional trade agreements on wage inequality between skilled and unskilled workers in Chile in the 2000s. Thus, we use data on effective tariff rates instead of uniform most-favored-nation rates to measure trade liberalization. We match panel data on industry characteristics, including effective tariff rates, to pooled individual cross-section data from national household surveys at the industry level. We find that the reductions in effective tariffs on final goods increase industry wage premiums, thus suggesting that liberalization-induced productivity improvements lead to higher wages. However, considering the differential impacts on different skill groups, we find that the reductions significantly increase industry wage premiums only for skilled workers, thereby increasing wage inequality. Moreover, the impact is larger in skilled workers employed in large-sized firms. The results are robust to the inclusion of other industry characteristics, including input tariffs, the share of foreign-owned capital, and payments to foreign technology. The results are also robust to the inclusion of industry productivity, which is likely to affect the effective tariffs and industry wage premiums simultaneously, as well as control for the potential endogeneity of trade policy.

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Trade Liberalization and Skill Premium in Chile

Cited by 6 publications

References 24 publications

Expanding higher education and wage inequality in Chile

Expanding higher education and wage inequality in Chile

Decline in values of degrees and recent evolution of wage inequality: Evidence from Chile

Trade liberalization and wage inequality: Evidence from Chile

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