Wage Structure Effects of International Trade:Evidence from a Small Open Economy

In the last decades, international trade has increased between industrialised countries andbetween high- and low-wage countries. This important change has raised questions on howinternational trade affects the labour market. In this spirit, this paper aims to investigate theimpact of international trade on wage dispersion in a small open economy. It is one of the fewto: i) use detailed matched employer-employee data to compute industry wage premia anddisaggregated industry level panel data to examine the impact of changes in internationaltrade on changes in wage differentials, ii) simultaneously analyse both imports and exports,and iii) examine the impact of imports according to the country of origin. Looking at the exportside, we find (on the basis of the system GMM estimator) a positive effect of exports onindustry wage premia. The results also show that import penetration has a significant andnegative impact on industry wage differentials whatever the country of origin. However, thecountry of origin appears to matter quite a lot. Indeed, the detrimental effect of imports onwages is found to be significantly bigger when the latter come from low-income countriesthan from high-income countries....