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American Economic Review Vol. 102 No. 3 2012

Trade, Labor Market Frictions, and Residual Wage Inequality across Worker Groups

Pravin Krishna1; Jennifer P. Poole2; Mine Zeynep Senses3

1 Johns Hopkins University, 1717 Massachusetts Avenue, NW, Washington, DC 20036. · 2 437 Engineering 2, Department of Economics, University of California, Santa Cruz, Santa Cruz, CA 95064. · 3 John Hopkins University, 1717 Massachusetts Avenue, NW, Washington, DC 20036.

Abstract

Using a matched employer-employee data set, we study the effects of trade liberalization on wage dispersion in Brazil across heterogeneous worker groups, keeping in mind that the assignment of workers to firms may be non-random and determined by the time-invariant productivity of workers specific to the firms with which they are matched. We find differential effects of trade reform on residual wage inequality across worker groups. High education workers experience greater increases in wage dispersion relative to low education workers following trade liberalization. This finding is broadly consistent with the theoretical predictions that emerge from models with heterogeneous firms, heterogeneous workers, and labor market frictions.

DOI
10.1257/aer.102.3.417
Volume
102
Issue
3
Pages
417-423
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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