Trade, skill premium and the gender wage gap: Evidence from manufacturing industries

Document Type : RESEARCH PAPER

Authors

1 DST/ NRF Newton Fund Trilateral Research Chair in transformative Innovation, the Fourth Industrial Revolution and Sustainable Development University of Johannesburg, Republic of South Africa

2 Professor of Economics, DUT Business School, Faculty of Management Sciences2, Durban University of Technology ML Sultan Campus, PO Box: 1334, Durban, , Republic of South Africa,

3 Associate Professor, Department of Economics, Faculty of Management and Economics, Sistan and Baluchestan University, Zahedan, Iran

Abstract

In the past decade, there have been many debates about globalization and its effects on economic, political and social aspects. In this regard, different countries have tried to lead to integration through trade agreements. These trade agreements have affected the structure of countries. On the other hand, the wage gap and wage inequality have created many challenges. Therefore, the paper assesses the impact of trade liberalization on the labour market by focusing on skill wage premiums. The paper tests these effects by developing a monopolistic competition model with two factors of production characterized by their skill levels (skilled and unskilled labour). The paper finds that tariff level reductions cause a moderate increase in the wage gap. Thus, our analysis shows that a 10% decrease in tariffs is accompanied by a 16.1 % increase in the skill premium. Also, the same level of tariff cut will on average increase the gender wage gap by 26.8%. The study implies that trade liberalization tends to benefit more workers in the skilled labour market compared to workers in the unskilled labour market.

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Stable Economy Journal
Volume 4, Issue 4 - Serial Number 13
December 2024
Pages 157-187

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