A Note on Terms of Trade Shocks and the Wage Gap

Author/Editor: Coble Fernandez, David O ; Magud, Nicolas E
Publication Date: December 01, 2010
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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.
Series: Working Paper No. 10/279
Subject(s): Chile | Developing countries | Economic models | Labor markets | Skilled labor | Terms of trade | Wages

Author's Keyword(s): Non-tradable goods | terms of trade shocks | distributive conflict.
Publication Date: December 01, 2010
Format: Paper
Stock No: WPIEA2010279 Pages: 27
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