A Noteon Terms of Trade Shocks and the Wage Gap

December 1, 2010

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A Noteon Terms of Trade Shocks and the Wage Gap, (USA: International Monetary Fund, 2010) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Using Chilean data, we document that for resource-rich small open economies the effects of terms of trade shocks on the wage gap (between skilled and unskilled workers) depend on factor intensities in the non-tradable sector, following the model in Galiani, Heymann, and Magud (2010). For a skilled-intensive non-tradable sector we show that improvements in the terms of trade benefit skilled workers. We also show that this relation holds at the industry level: the wage gap widens in skilled-intensive sectors while it shrinks in unskilled-intensive ones, the more so as terms of trade volatility decreases.

Subject: Economic sectors, Income distribution, International trade, Labor, Manufacturing, National accounts, Terms of trade, Unskilled labor, Wage gap

Keywords: Distributive conflict, Global, Income distribution, Manufacturing, Non-tradable goods, Real wage, Skilled worker, Terms of trade, Terms of trade coefficient, Terms of trade datum, Terms of trade result, Terms of trade shock, Terms of trade shocks, Terms of trade term, Unskilled labor, Wage, Wage gap, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/279
Stock No:

WPIEA2010279
ISBN:

9781455210862
ISSN:

1018-5941

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