Round Table Discussion - Trade and Global Poverty: Wages

1. Round Table Discussion-Trade and Global Poverty: Wages L Alan Winters University of Sussex, CEPR, IZA, GDN

2. Factor Incomes Total income is a sum across Sources of income Individuals in household Wages often discussed in context of inequality Need to decide how to aggregate across time Year, cycle, lifetime? and, for aggregates, across space Village, district, state, country? Round Table

3. Labour Income Wages and/or employment Structure of labour markets is critical - large differences across countries/regions mobility between regions – migration key mobility between sectors, firms – specific factors model, rent-sharing flexibility of wages Results differ considerably Round Table

4. Stolper-Samuelson Theorem Inter-sectoral mobility; flexible wages economy-wide view Poor record empirically Data difficulties, dimensionality, defining factors, assumption of integrated labour markets Labour rarely re-allocates in a major way Labour heterogeneity – several(?) groups Unskilled labour usually does worst, not best Skilled labour use increasing in most sectors (mid. Income countries) Round Table

5. The Widening Skills Gap Other economy-wide views: Initial pattern of protection (Lat Am) China has pinned the unskilled wage at very low levels Tasks that relocate are relatively unskilled in the North and relatively skilled in the South (Feenstra and Hanson, 1996) Outsourcing but not exclusively so Round Table

6. Complementarity Skills and natural resources or capital are complementary Liberalisation increases imports of equipment that need skilled labor to work Defensive innovation is skill biased – innovation related to size of shock Export penetration requires skills (quality higher) Intra-sectoral re-allocation – unskilled tasks outsourced (Grossman and Rossi-Hansberg) Round Table

7. Segmented Labour Markets: Space Segmentation seems pretty dominant Geographical segmentation – across regions Especially for multi-island economies Large economies Ethnically diverse countries Repeats integrated-economyresults on smaller scale e.g central highlands of Vietnam and coffee Round Table

8. Arguably still more plausible Recent boom in research Labour as the specific factor Workers may share sectoral/firm rents influenced by trade policy; ‘fair wage’ models Variation with regional ‘exposure’ to globe: Import-competing sectors lose from liberalisation, especially if it reduces regulatory rents Export sectors gain Segmented Labour Markets: Sectors and Firms Round Table

9. Heterogeneous firms (Melitz, 2003) Exporters more efficient; May correlate with use of intermediates (Amiti) Liberalisation may increase the gap if it boosts exports Heterogeneous workers (within groups) Exporters get better workers (Helpman et al) Pay better, better at selecting? Helps to explain significant inequality within sectors and occupations Heterogeneity Round Table

10. Egger, Egger, Kreickmeier(Europe) exporting firms pay higher wages Amiti, Cameron (Indonesia) Liberalising imports of intermediates narrows skills premium Juhn et al (Mexico in NAFTA) Improved market access boosts technology level and so increases relative demand for female workers (brain vs.brawn) Examples Round Table

11. Employment Sectoral re-allocation vs. unemployment Sometimes moves into informality especially if labour regulation strict (Goldberg and Pavcnik) But informality is not the same as poverty Nicita – simulates Madagascar textiles boom Identifies workers called to new jobs (out of informal sector) Not always the poor – skills, location, Round Table

12. Thank you Round Table