Trade liberalization and wage inequality: Evidence from Chile

This study analyzes the impacts of further tariff reductions resulting from proliferation regional trade agreements on wage inequality between skilled and unskilled workers in Chile 2000s. I match panel data industry-level effective rates other industry variables calculated plant-level microdata to pooled individual cross-section national household surveys at level. Based this unique set, estimate tariffs workers’ wages directly one stage. find that a reduction final goods leads an increase skill premiums. Moreover, impact premiums is larger for employed large-sized firms. Therefore, findings indicate increased import competition due output upgrading within industries, thereby increasing demand workers. The results are robust possible endogeneity inclusion productivity.