TRADE REFORM: Wage Inequality and Globalization 6


The relative wages of white-collar workers are higher in medium-size plants, with less than 750 workers. Relative white-collar wages are also higher in more capital-intensive plants. Most of the dummy variables for the capital-labor quintiles are positive and statistically significant, and all of the plant-size dummy variables are positive and generally statistically significant. Relative wages are positively correlated with the share of profit-sharing payments in plant labor costs, indicating that the wage gap is higher in plants that have profit-sharing arrangements. Finally, the increasingly less negative and significant coefficients on the year dummy variables indicate that there is a strong time trend towards increasing wage inequality that is not explained by observable plant or industry characteristics.

The OLS regressions with the relative employment of white-collar workers as the dependent variable are reported in Table 6. The impact of tariffs and quotas is again mixed, depending on the specification. Across the levels specifications, we generally find that high tariffs are negatively associated with relative skilled employment, while high quotas are positively associated with the relative employment of white-collar labor.

Only the first differences are consistent for both tariffs and quotas: a reduction in protection is associated with an increase in the relative employment of white-collar workers. This result is consistent with Hanson and Harrison (forthcoming), who find that the pattern of protection prior to reform was skewed towards protecting sectors with a high share of blue-collar employment.
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Among the technology variables, the relative employment of white-collar labor is positively correlated with royalty payments and the use of imported machinery or material inputs, and negatively correlated with equipment investment. There is a strong positive correlation between the plant capital-labor ratio and the relative employment of white-collar workers for all but the largest plants. The relative employment of white-collar labor is negatively correlated with the share of social security payments and the share of profit-sharing payments in plant labor costs, which may indicate that plants with a stronger union presence — and hence more mandated payments to labor — employ relatively less white-collar labor.

Although tariff and quota levels are generally not significant in explaining relative wages and employment, as indicated by the results reported in Tables 5 and 6, this is not surprising.

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