GEP Research Paper 02/12
International Trade and Rent Sharing in Developed and Developing Countries
L. Fontagné and D. Mirza
Abstract
In this paper, we derive then test a theoretical equation, based on rent sharing theories, linking industry wages to openness variables. This relation has three main features: 1/ it can be easily confronted to the data. 2/ it allows for both impacts of import and export variables to be properly considered in a same testable wage equation. 3/ it stresses explicitly the role of imperfect market structures of goods and labor, as well as their interaction, when studying wages' response to openness. We construct a dataset that provides together trade, activity and labor related data for around 29 industries and 65 countries between 1981 and 1997. We find, for OECD countries, that an increase in export as well as domestic market shares is associated with growth in wages in roughly half of the industries. Among developing countries, Mediterranean followed by Latin American countries, are those where such phenomenon of rent-sharing can be observed. This does not seem to be the case in Asia however.
Issued in September 2002.
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