Trade liberalization and wage inequality between urban and rural labor

Document Type : Research article

Authors

• younes goli ¹
• younes goli ²
• hosain goli ²

¹ razi university

² razi

https://doi.org/10.22067/erd.v22i9.42994

Abstract

This study examins effects of trade liberalization on the wage inequality between urban and rural labor by utilizing the data of micro-level Households’ Income and Expenditures surveys and trade statistics over 2001-2011. The analysis is carried based on the Heckscher–Ohlin’s theory in international trade and Baker’s taste discrimination theory at firms. We use Quantile regression and ordinary least squares (OLS) to consider the wage discrimination across entire distribution wage and at wages mean as well. The results of Blinder-Oaxaca decomposition approach (inequality at mean wage), indicate that over the aforementioned period wage gap and discrimination has decreased. Unexplained portion of the wage gap (wage discrimination) is low relative to the unexplained wage gap implies that the effectiveness. But estimates show that in rural sector the share of final consumer goods in imports is relatively high and urban sectors share of capital goods imports is relatively high. Thus, trade liberalization increases the wage gap

Keywords

• wage inequality
• trade liberalization
• l Oaxaca-Blinder decomposition
• Baker’s taste discrimination

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