Trade Openness and Labor Gender Gaps in DR-CAFTA Countries

Type Working Paper - World Bank, Washington, DC
Title Trade Openness and Labor Gender Gaps in DR-CAFTA Countries
Publication (Day/Month/Year) 2010
Gender disparities are an important component of overall inequality. This paper main objective is to assess the relationship between gender disparities and trade for the DR-CAFTA region and, more specifically, to answer these two questions: a) does trade expansion increase women?s employment opportunities relative to men?s? b) What are the effects of trade on earnings gender gaps? The most important finding is that we identify both equalizing and un-equalizing effects of trade liberalization on the wage gender gap for the countries in the region. Liberalization of own tariffs may induce a larger gender wage gap if not compensated by reciprocal reductions of faced tariffs and actual markets integration (as proxied, for example, by increasing import to GDP shares). Trade liberalization through a reduction of own tariffs, increases the wages of all workers in the tradable sector. The rise however is not uniform for men and women and depends also on their skill level. The changes range from the largest gain for skilled men of 4.45 percent to a much smaller one of 0.04 percent for skilled women. These differential effects widen the gender wage gap by 2.60 percentage points for the unskilled and 4.22 percentage points for the skilled. Interestingly, a reduction of faced tariffs, also increases the wages of workers in the tradable sector, but in this case it favors women more than men. Skilled females earn 1.13 percent more, whereas skilled men only a 0.12 percent more (and unskilled men earn 1.01 percent less). This combined effect reduces the gender wage gap in around 1 percentage points for both skilled and non skilled workers. This evidence of a link between trade liberalization and higher labor earnings, especially for unskilled workers is consistent with the standard trade theory?s prediction for small countries that are relatively abundant in unskilled labor. Additionally, the finding that women are relatively favored by reductions in faced tariffs is also consistent with the observation that women tend to be intensively employed in export oriented industries.

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