Squire, LynMilanovic, Branko2012-06-252012-06-252005-04https://hdl.handle.net/10986/8980The objective of the paper is to answer an often asked question: If tariff rates are reduced, what will happen to wage inequality? The authors consider two types of wage inequality: between occupations (skills premium) and between industries. They use two large databases of wage inequality that have recently become available and a large data set of average tariff rates covering the period between 1980 and 2000. The authors find that tariff reduction is associated with higher inter-occupational and inter-industry inequality in poorer countries (those below the world median income) and the reverse in richer countries. However, the results for inter-occupational inequality must be treated with caution.CC BY 3.0 IGOAVERAGE INCOMEAVERAGE INCOMESAVERAGE TARIFFCAPITAL ACCOUNTCAPITAL FLOWSCHANGES IN TRADECOMPARATIVE ADVANTAGECROSS-COUNTRY REGRESSIONDATA COLLECTIONDATA SETDECLINING INEQUALITYDEMOGRAPHICSDEPENDENT VARIABLEDEVELOPING COUNTRIESEARNINGS INEQUALITYECONOMIC RESEARCHEMPIRICAL ANALYSISEMPIRICAL ESTIMATIONEMPIRICAL EVIDENCEEMPIRICAL LITERATUREEMPIRICAL MODELEMPIRICAL STUDIESEMPIRICAL WORKEQUILIBRIUMEXCESS PROFITSEXPLANATORY VARIABLEEXPLANATORY VARIABLESEXPORT ORIENTATIONEXPORT VOLUMESEXPORTSEXTERNALITIESFAMILY BENEFITSFINANCIAL LIBERALIZATIONFOREIGN COMPETITIONFOREIGN DIRECT INVESTMENTFOREIGN INVESTMENTSFOREIGN INVESTORSGDPGINI INDEXGLOBAL ECONOMYIMPACT OF TRADEINCOME DISTRIBUTIONINCOME LEVELINCREASE WAGE INEQUALITYINCREASED INEQUALITYINCREASING FUNCTIONINCREASING WAGEINCREASING WAGE INEQUALITYINEQUALITY MEASUREINEQUALITY MEASURESINVESTMENT FLOWSLABOR DEMANDLABOR FORCELABOR MARKETLABOR MARKETSLIBERALIZATIONLIBERALIZATION OF TRADELOW INCOMEMEAN INCOMESMEDIAN INCOMENATURAL RESOURCESNEGATIVE IMPACTOBSERVED CHANGEOILOPENNESSPOLICY CHANGEPOLICY CHANGESPOLICY INDICATORSPOLICY REFORMSPOLICY RESEARCHPOLICY VARIABLESPOLITICAL ECONOMYPOLITICAL ECONOMY CONSIDERATIONSPOOR COUNTRIESPOOR COUNTRYPOSITIVE RELATIONSHIPPRODUCTIVITYREAL WAGESRELATIVE DEMANDRELATIVE WAGESRISING INEQUALITYSKILL LEVELSKILL PREMIUMSKILLED LABORSKILLED SECTORSKILLED WAGESSKILLED WORKERSSOCIAL TRANSFERSTARIFF LEVELSTARIFF RATETARIFF RATESTARIFF REDUCTIONTAX REFORMTECHNOLOGICAL CHANGETECHNOLOGICAL PROGRESSTRADETRADE EFFECTTRADE LIBERALIZATIONTRADE LIBERALIZATIONSTRADE OPENNESSTRADE POLICIESTRADE POLICYTRADE PROTECTIONTRADE REFORMTRADE REFORMSTRADE REGIMETRADE REGIMESTRADE VOLUMESUNSKILLED LABORUNSKILLED WORKERSVOLUME OF TRADEWAGE CHANGESWAGE DIFFERENTIALSWAGE DISTRIBUTIONWAGE GAPWAGE RATESWorld Bank10.1596/1813-9450-3571