Searching for the Smoking Gun : Did Trade Hurt Unskilled Workers?

We conduct an economy-wide analysis of the association between trade and wages in New Zealand and decompose the influence of imports on relative wages by sector and region. We find that increased imports resulted in a small increase in wage inequality but this rise was offset by downward pressure on the skill premium due to increased exports. In aggregate, we observe that increased openness (rising imports and exports) decreased New Zealand wage inequality. We also find that imports from developed nations resulted in a greater increase in the New Zealand skill premium than imports from developing nations