The Unequal Effects of Globalization by Pinelopi Koujianou Goldberg

Author:Pinelopi Koujianou Goldberg [Goldberg, Pinelopi Koujianou]
Language: eng
Format: epub
Tags: Globalization; De-globalization; Global Value Chains (GVCs); Trade; Inequality
Publisher: MIT Press
Published: 2023-06-29T00:00:00+00:00

Figure 2.8

Effects of Brazilian trade liberalization on employment, 1988–2010. Source: Rafael Dix-Carneiro and Brian Kovak, “Trade Liberalization and Regional Dynamics,” American Economic Review 107, no. 10 (October 2017): 2908–2946.

Figure 2.9 shows that a similar or even worse story unfolded in terms of Brazilian workers’ wages. In the late 1980s, worker earnings in the formal sector of regions ultimately hit hard by liberalization were increasing at a rapid pace. After liberalization, wages fell sharply compared to regions not affected by liberalization, and they continued to decline for nearly two decades. The only reason earnings finally stabilized, as Dix-Carneiro and Kovak show, is that workers left the formal sector and sought informal employment (i.e., businesses not registered by tax authorities). But this is not a positive outcome; these jobs are generally considered to be less desirable for workers, with fewer benefits, less stability, and diminished job security. The transition to informality raises many questions about labor market frictions, which are explored in further work.26 To the extent that these effects generalize to other contexts, they have profound implications for the relationship between trade and regional inequality.

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