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

Abstract: How does globalization affect inter-occupational wage inequality within countries? This paper empirically examines this issue by focusing on two dimensions of globalization, openness to trade and openness to capital, using a relatively new dataset on occupational wages. Estimates from dynamic models for 52 countries for the 1983-2002 period suggest that openness to trade contributes to an increase in occupational wage inequality within developed countries, but that the effect diminishes with an increased level of development. In the context of developing countries, the results suggest that the effect of openness to trade on wage inequality is insignificant and does not vary with the level of development. Our results also suggest that openness to capital does not affect occupational wage inequality in either developed or developing countries.

Keywords: openness to trade; openness to capital; foreign direct investment; occupational wage inequality; panel data; dynamic model

JEL-codes: C33; F15; F16; F23; J31

33 pages, April 23, 2008

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