A Noteon Terms of Trade Shocks and the Wage Gap [electronic resource]
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TextSeries: IMF Working Papers; Working Paper ; No. 10/279Publication details: Washington, D.C. : International Monetary Fund, 2010Description: 1 online resource (27 p.)ISBN: 1455210862 :ISSN: 1018-5941Subject(s): Distributive Conflict | Neoclassical Models of Trade | Non-Tradable Goods | Nonrenewable Resources and Conservation: Other | Skilled Workers | Terms of Trade | ChileAdditional physical formats: Print Version:: A Noteon Terms of Trade Shocks and the Wage GapOnline resources: IMF e-Library | IMF Book Store Abstract: 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.
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.
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