Round Table Discussion - Trade and Global Poverty: Wages L Alan Winters University of Sussex, CEPR,...

Round Table Discussion-

Trade and Global Poverty: Wages

L Alan WintersUniversity of Sussex,

CEPR, IZA, GDN

Round Table 226 June 2013

Factor Incomes

• Total income is a sum across– Sources of income– Individuals in household–Wages often discussed in context of inequality

• Need to decide how to aggregate across time– Year, cycle, lifetime?

• and, for aggregates, across space – Village, district, state, country?


Labour Income

• Wages and/or employment• Structure of labour markets is critical - large

differences across countries/regions – mobility between regions – migration key– mobility between sectors, firms – specific factors

model, rent-sharing– flexibility of wages

• Results differ considerably

Round Table 4

Stolper-Samuelson Theorem• Inter-sectoral mobility; flexible wages economy-

wide view– Poor record empirically – Data difficulties, dimensionality, defining factors,

assumption of integrated labour markets– Labour rarely re-allocates in a major way

• Labour heterogeneity – several(?) groups– Unskilled labour usually does worst, not best– Skilled labour use increasing in most sectors (mid.

Income countries)26 June 2013

Round Table 5

The Widening Skills Gap

Other economy-wide views:• Initial pattern of protection (Lat Am)

• China has pinned the unskilled wage at very low levels

• Tasks that relocate are relatively unskilled in the North and relatively skilled in the South (Feenstra and Hanson, 1996)– Outsourcing but not exclusively so

26 June 2013

Round Table 6

Complementarity

• Skills and natural resources or capital are complementary

• Liberalisation increases imports of equipment that need skilled labor to work

• Defensive innovation is skill biased – innovation related to size of shock

• Export penetration requires skills (quality higher)

• Intra-sectoral re-allocation – unskilled tasks outsourced (Grossman and Rossi-Hansberg)

26 June 2013

Round Table 7

Segmented Labour Markets: Space

• Segmentation seems pretty dominant• Geographical segmentation – across regions– Especially for multi-island economies– Large economies– Ethnically diverse countries

• Repeats integrated-economy results on smaller scale– e.g central highlands of Vietnam and coffee

26 June 2013


• Arguably still more plausible• Recent boom in research• Labour as the specific factor • Workers may share sectoral/firm rents

influenced by trade policy; ‘fair wage’ models• Variation with regional ‘exposure’ to globe:– Import-competing sectors lose from liberalisation,

especially if it reduces regulatory rents– Export sectors gain

Segmented Labour Markets: Sectors and Firms


• Heterogeneous firms (Melitz, 2003)• Exporters more efficient; –May correlate with use of intermediates (Amiti)– Liberalisation may increase the gap if it boosts

exports

• Heterogeneous workers (within groups)– Exporters get better workers (Helpman et al)– Pay better, better at selecting?

• Helps to explain significant inequality within sectors and occupations

Heterogeneity


• Egger, Egger, Kreickmeier (Europe)– exporting firms pay higher wages

• Amiti, Cameron (Indonesia)– Liberalising imports of intermediates narrows

skills premium

• Juhn et al (Mexico in NAFTA)– Improved market access boosts technology level

and so increases relative demand for female workers (brain vs.brawn)

Examples

Round Table 11

Employment

• Sectoral re-allocation vs. unemployment• Sometimes moves into informality – especially if labour regulation strict (Goldberg and

Pavcnik)– But informality is not the same as poverty

• Nicita – simulates Madagascar textiles boom– Identifies workers called to new jobs (out of

informal sector)– Not always the poor – skills, location,

26 June 2013


Thank you

Round Table Discussion - Trade and Global Poverty: Wages L Alan Winters University of Sussex, CEPR,...

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