Trade, Skill Formation and the Wage-Gap

Abstract

In the theoretical analyses of the earlier chapters the focus has been on the wage inequality between skilled and unskilled at a very aggregate level instead of on the changes in wage inequality among workers of different skills or abilities. But intra-skill wage distribution can easily be a separate focal point for research in the current context. In Chile, for example, the wage-gap between workers with university degree and with secondary education (measured by their wage ratio) has been more pronounced than that between workers with university degree and with primary education for all age groups (see Table 2.4). In India, on the other hand, the wage-gap between graduates and non-literates has in fact declined in the manufacturing sector during 1987-94 (see Table 2.6). The middle-aged Chilean workers with university degree had similar experience of declining wage-gap vis-à-vis those with secondary education. These small but curious pieces of evidence seem to deserve some theoretical attention. At the same time, almost all-round growing wage inequality in Chile across skills, however asymmetric that may be, and somewhat mixed experience in India, warrant different explanations for the possible underlying causes.