International Trade and Wage Inequality: Evidence from Brazil
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trade_and_wage_inequality.pdf
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Checksum (MD5)
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Author(s)
Chagas, Lucas
Sant Anna, Vinicios
Dix-Carneiro, Rafael
Firpo, Sergio
Garin, Andrew
Krasa, Stefan
Lemus, Jorge
Mitchener, Kris
Muendler, Marc
Perry, Martin
Date Issued
December 2024
Journal
International Economics
Version
Author's final manuscript
Abstract
We study the effect of the bilateral trade integration with China on wage inequality in Brazil. Previous studies have documented the contribution of trade opening to the decline in inequality since the 1990s, driven primarily by cross-firm pay differences. We find a sharper reduction in wage inequality over the 2000s, parallel to China's accession to the WTO. Our analysis of the China shock suggests that some firms are harmed by import competition, especially those in the High-Tech Manufacturing sector, while others profit from increased exports and cheaper inputs. We rationalize these patterns by extending the theoretical framework of Helpman et al. (2017) to include sector heterogeneity in trade exposure and firm-level selection into imports. Our model indicates that the rise of China led to a reduction in cross-firm wage inequality in Brazil by about 5%.
Subjects
Trade
Wage Inequality
Labor Markets
China
Brazil JEL Classification: F16
J21
J31
Terms of Use
Creative Commons Attribution-NonCommercial-NoDerivatives
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1016/j.inteco.2024.100536
