Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 205: Trade Liberalization and Wage Inequality: Empirical Evidence from Bangladesh

Dick Durevall () and Farzana Munshi ()
Additional contact information
Dick Durevall: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Farzana Munshi: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG

Abstract: This paper explores the relationship between trade liberalization and skilled-unskilled wage inequality in the Bangladesh cotton textile industry. A dynamic two-equation model is estimated for wages of skilled and unskilled workers over the period 1973-2002, using four different openness measures. In no case does opening up affect unskilled wages differently than skilled wages, implying that openness per se has not contributed to changes in wage inequality. Our findings also suggest that openness increased real wages for both skilled and unskilled workers.

Keywords: Bangladesh; cotton textile industry; openness; relative wages; trade liberalization; wage inequality

JEL-codes: F13; F14; F15; O15; O24

33 pages, April 28, 2006

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