Human Capital, Trade Liberalization, and Income Risk
Using data from Mexico, the authors study empirically the link between trade policy and individual income risk and the extent to which this varies across workers of different human capital (education) levels. They use longitudinal income data on wo...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2007/07/7848133/human-capital-trade-liberalization-income-risk http://hdl.handle.net/10986/7467 |
| Summary: | Using data from Mexico, the authors
study empirically the link between trade policy and
individual income risk and the extent to which this varies
across workers of different human capital (education)
levels. They use longitudinal income data on workers to
estimate time-varying individual income risk parameters in
different manufacturing sectors in Mexico between 1987 and
1998, a period in which the Mexican economy experienced
substantial changes in trade policy. In a second step, they
use the variations in trade policy across different sectors
and over time to estimate the link between trade policy and
income risk for workers of varying education levels. The
authors' findings are as follows. The level of openness
of an economy is not found to be related to income risk for
workers of any type. Furthermore, changes in trade policy
(that is, trade policy reforms) are not found to have any
effect on the risk to income faced by workers with either
low or high levels of human capital. But workers with
intermediate levels of human capital are found to experience
a statistically and economically significant increase in
income risk immediately following liberalization of trade.
The findings thus point to an interesting non-monotonicity
in the interaction between human capital, income risk and
trade policy changes. |
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