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American Economic Review: Vol. 102 No. 3 (May 2012)

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

Article Citation

Krishna, Pravin, Jennifer P. Poole, and Mine Zeynep Senses. 2012. "Trade, Labor Market Frictions, and Residual Wage Inequality across Worker Groups." American Economic Review, 102(3): 417-23.

DOI: 10.1257/aer.102.3.417

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.

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Authors

Krishna, Pravin (Johns Hopkins U)
Poole, Jennifer P. (U CA, Santa Cruz)
Senses, Mine Zeynep (Johns Hopkins U)

JEL Classifications

F16: Trade and Labor Market Interactions
J31: Wage Level and Structure; Wage Differentials


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