Trade Liberalization and the Evolution of Skill Earnings Differentials in Brazil

Centro Studi d'Agliano Development Studies Working Paper No. 216

37 Pages Posted: 20 Feb 2007

See all articles by Gustavo M. Gonzaga

Gustavo M. Gonzaga

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics

Naércio Menezes Filho

University of Sao Paulo (USP), Faculdade de Economia, Administração e Contabilidade (FEA)

Maria Cristina T. Terra

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Date Written: July 2006

Abstract

Skilled labor earnings di¤erentials decreased during the trade liberalization implemented in Brazil from 1988 to 1995. This paper investigates the role of trade liberalization in explaining these relative earnings movements. We perform several independent empirical exercises that check the traditional trade transmission mechanism, using disaggregated data on tariffs, prices, wages, employment and skill intensity. We find that: i) employment shifted from skilled to unskilled intensive sectors, and each sector increased its relative share of skilled labor; ii) relative prices fell in skill intensive sectors; iii) tariff changes across sectors were not related to skill intensities, but the pass-through from tari¤s to prices was larger in skill intensive sectors; iv) the decline in skilled earnings differentials mandated by the price variation predicted by trade is very close to the observed one. The results are compatible with trade liberalization accounting for the observed relative earnings changes in Brazil.

Keywords: Skill earnings differentials, Trade liberalization, Tariffs pass-through, Stopler-Samuelson

JEL Classification: F13, J31

Suggested Citation

Gonzaga, Gustavo M. and Menezes Filho, Naércio and Trindade Terra, Maria Cristina, Trade Liberalization and the Evolution of Skill Earnings Differentials in Brazil (July 2006). Centro Studi d'Agliano Development Studies Working Paper No. 216, Available at SSRN: https://ssrn.com/abstract=963415 or http://dx.doi.org/10.2139/ssrn.963415

Gustavo M. Gonzaga

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil
+55 21 274 2797 (Phone)
+55 21 294 2095 (Fax)

HOME PAGE: http://www.econ.puc-rio.br/Gonzaga/Pdf/cv_us_last_version.pdf

Naércio Menezes Filho

University of Sao Paulo (USP), Faculdade de Economia, Administração e Contabilidade (FEA)

Av. Prof. Luciano Gualberto 908
São Paulo SP, São Paulo 05508-900
Brazil

Maria Cristina Trindade Terra (Contact Author)

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1124, CEP
sala 1100
Rio de Janeiro RJ 22253-900
Brazil
+5521 559 5844 (Phone)
+5521 553 8821 (Fax)

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