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Trade Liberalization and Wage Inequality: Evidence from Korea

Author

Listed:
  • Juyoung Cheong

    (Kyung Hee University)

  • SeEun Jung

    (Inha University)

Abstract
This paper investigates the heterogeneous income distribution effects of trade liberalization using Korean survey data from years of 2000 to 2015. Following the Stolper-Samuelson theorem most of previous research studying the effects of trade liberalization on wage differences focus on workers' characteristics (e.g., skilled or unskilled) while heterogeneity within the same worker group has not been yet substantially investigated. To fill this gap, this paper provides empirical evidence of wage inequality across firms within the same group of workers caused by trade liberalization, potentially implied in the new-new trade models with firm heterogeneity. Employing a difference-in-differences (DID) specification, we find that the wages of unskilled workers in Korea have increased since its FTAs with more advanced countries, such as members of EU and the US, came into effect, while the effects on the wages of skilled workers are negative but not statistically significant. We also show that wage effects are heterogeneous across firms within unskilled and skilled worker groups, while the positive effects are statistically significant and largest for unskilled workers in medium-large sized firms. These findings are in line with both traditional and new-new trade models.

Suggested Citation

  • Juyoung Cheong & SeEun Jung, 2020. "Trade Liberalization and Wage Inequality: Evidence from Korea," Inha University IBER Working Paper Series 2020-4, Inha University, Institute of Business and Economic Research.
    • Handle: RePEc:inh:wpaper:2020-4
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    References listed on IDEAS

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    2. Ponce, Pablo & Yunga, Fernando & Larrea-Silva, Jhohana & Aguirre, Nikolay, 2023. "Spatial determinants of income inequality at the global level: The role of natural resources," Resources Policy, Elsevier, vol. 84(C).
    3. Tomasz Serwach, 2023. "The European Union and within‐country income inequalities. The case of the new member states," The World Economy, Wiley Blackwell, vol. 46(7), pages 1890-1939, July.
    4. Tomasz Serwach, 2022. "The European Union and within-country income inequalities. The case of the New Member States," Working Papers hal-03548416, HAL.
    5. Malin Song & Weiliang Tao, 2022. "Coupling and coordination analysis of China's regional urban‐rural integration and land‐use efficiency," Growth and Change, Wiley Blackwell, vol. 53(3), pages 1384-1413, September.

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    More about this item

    Keywords

    Income inequality; wages; firm heterogeneity; trade liberalization;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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