تجارت، دستمزد، و اقتصاد سیاسی حمایت تجاری : شواهدی از اصلاحات تجاری کلمبیا

Worker industry affiliation plays a crucial role in how trade policy affects wages in many trade models. Yet, most research has focused on how trade policy affects wages by altering the economy-wide returns to a specific worker characteristic (i.e., skill or education) rather than through worker industry affiliation. This paper exploits drastic trade liberalizations in Colombia in the 1980s and 1990s to investigate the relationship between protection and industry wage premiums. We relate wage premiums to trade policy in an empirical framework that accounts for the political economy of trade protection. Accounting for time-invariant political economy factors is critical. When we do not control for unobserved time-invariant industry characteristics, we find that workers in protected sectors earn less than workers with similar observable characteristics in unprotected sectors. Allowing for industry fixed effects reverses the result: trade protection increases relative wages. This positive relationship persists when we instrument for tariff changes. Our results are in line with short- and medium-run models of trade where labor is immobile across sectors or, alternatively, with the existence of industry rents that are reduced by trade liberalization. In the context of the current debate on the rising income inequality in developing countries, our findings point to a source of disparity beyond the well-documented rise in the economy-wide skill premium: because tariff reductions were proportionately larger in sectors employing a high fraction of less-skilled workers, the decrease in the wage premiums in these sectors affected such workers disproportionately.

The public debate on the merits and perils of trade liberalization often centers on the question of how trade reforms will affect labor markets. But despite the prominence of this question in public policy, empirical research to date has offered no conclusive evidence on the effects of trade liberalization on employment and wages. This state of affairs reflects two main difficulties associated with empirical work in the area. The first one is a measurement issue: in recent years, trade protection in developed countries has taken the form of nontariff barriers (NTBs) that are inherently hard, if not impossible, to measure.1 Accordingly, while one might hope to use recent waves of trade liberalization as a testing ground to identify the effects of trade on wages, inference is limited by the lack of proper measures of this liberalization. The measures of international integration usually employed in the literature (imports, exports, import and export growth, import price indices, or product prices when available) are highly contentious, as they are associated with conceptual problems in their interpretation, while regressions employing them as explanatory variables suffer from simultaneity biases. These problems are particularly severe when quantity measures are used. As has been pointed out before, in general equilibrium trade models, trade affects wages through prices that are set on the margin, and not through quantities. The use of price data, on the other hand, raises other issues: prices are plagued by measurement problems and are simultaneously determined with wages. As Freeman (1995) points out, “perhaps the biggest problem with these studies is that they ignore potential determinants of sectoral prices…save for trade”.2 Similarly, Haskel and Slaughter (2001) argue that relying on product prices could be problematic since little is known about “how much domestic price variation is caused by international trade, such as changes in trade barriers”.3

This paper set out to exploit the Colombian trade liberalization experiment to investigate the relationship between trade policy and industry wage premiums. Our main finding is that in sectors with larger tariff reductions, wages declined relative to the economy-wide average. To obtain this finding, we utilized detailed information on worker and firm characteristics that allowed us to control for observed industry heterogeneity of workers across industries, and the panel nature of our industry-level data that allowed us to control for unobserved heterogeneity and political economy factors through industry fixed effects. Conditioning on time-invariant industry attributes reversed the sign of the relationship between tariffs and industry wage differentials from negative (the sign found in previous work) to positive. These results were robust to the inclusion of trade flow variables and their interactions with exchange rates and conditioning on capital accumulation in each industry. More importantly, the positive relationship was robust to using instrumental variables to account for time-varying political economy factors affecting trade policy changes and time-varying selection (albeit the magnitude of the effect decreased). Our results are in line with trade models in which labor mobility across sectors is constrained in the short (or medium) run. Alternatively, they could be interpreted as evidence that trade liberalization reduced existing industry rents. Whatever interpretation one adopts, our findings suggest an additional channel through which income inequality in developing countries may have been affected during this period. Since the tariff cuts were concentrated in sectors with a high proportion of unskilled workers (see Fig. 3), such workers may have been hit by the reforms twice: not only was the skill premium rising in the 1980s and 1990s, but also less-skilled workers experienced an additional decrease in their relative incomes because the industries in which they were employed experienced a decline in their wage premiums relative to industries with more skilled workers.