The Impact of Trade Liberalisation on Wage Inequality: Case of Pakistan.

Zara Salman, Mariam Javed


This paper examines whether trade liberalisation played a role
in shaping the wage structure of Pakistan in the late 1990s and early
2000. It uses manufacturing workers data from LFS supplemented by
external information to analyse the impact of trade liberalisation. In
general, the results show that trade liberalisation, measured through
import penetration ratio, export penetration ratio and relative prices
of each industry, not only impacted wages but also increased wage
inequality across skill levels from 1996-97 to 2005-06. The econometrics
analysis confirms that increase in import penetration raises skilled
premium while simultaneously reducing unskilled premium; a result in
contention with the findings of the Stolper-Sameulson

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