Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom
Author(s)
Borjas, George J.; Ramey, Valerie A.
Abstract
Economic theory suggests that greater openness to world trade in developing countries will reduce wage inequality. Trade liberalization raises the relative demand for unskilled workers and therefore reduces the wage gap between the skilled and the unskilled. The evidence for East Asia during the 1960s and 1970s supports this theory, but the Latin American experience since the mid-1980s does not. This article examines this conflict of evidence. It asks whether these findings reflect a difference between the time periods.
