The Impact of Trade Liberalization on Wage Inequality: Evidence from Argentina

Sebastian Galiani and Pablo Sanguinetti , Journal of Development Economics 72(2) , 497-513 , December 2003.

Wage inequality in Argentina greatly increased during the nineties. During this period, a rapid and deep process of trade liberalization was implemented. In this paper we study whether trade liberalization played any role in shaping the Argentine wage structure during the nineties. Specifically, we test whether those sectors where import penetration deepened are also the sectors where, ceteris paribus, a higher increase in wage inequality is observed. We find evidence that supports this hypothesis. However, as has been found for some developed economies, trade deepening can only explain a relatively small proportion of the observed rise in wage inequality. 

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