Trade liberalization and wage inequality : a panel regression model

Abstract EN

This paper is trying to answer an old question Does trade liberalization lead to higher wage inequality? To answer this question, I used a sample of 27 countries during 10 years, 1987-1996.

Panel data regression model technique is used to estimate this relationship.

The results of estimated models show that in low-income and lower-middle income countries, an increase in trade liberalization leads to higher level of wage inequality, and it is significant in case of lower-middle income countries.

However, I upper-middle income and high income countries, the higher trade liberalization the lower wage inequality is.

Furthermore, the rise in female share in labor market decrease the wage inequality, and higher level of employment in leading sector of production, i.e.

industry or agriculture, enhance the wage equality in the economy.

Although, the effect of urban population size on wage inequality is ambiguous.