TITLE:
Effects of International Trade on Wage Inequality in the SADC Region
AUTHORS:
Nancy Cynthia Chigwenembe, Wenping Zheng
KEYWORDS:
International Trade, Wage Inequality, Skilled Labour, Unskilled Labour, Quantile Regression, Panel Econometrics
JOURNAL NAME:
Modern Economy,
Vol.15 No.10,
October
25,
2024
ABSTRACT: The study analyzes the effect of international trade on wage inequality in the Southern African Development Community region using quantile regression. The findings indicate a positive relationship between international trade and average wage, with international trade contributing to increased wage inequality by widening the gap between high and low-income earners. The results suggest that international trade raises wages for skilled labor while reducing wages for unskilled labor, further increasing inequality. The results also highlight the role of skill-biased technological change, which favors skilled workers, thereby reinforcing wage inequalities in the region. Contrary to the Stolper-Samuelson theorem, which suggests that international trade benefits the abundant factor of production, this study finds that international trade in the SADC region contributes to rising wage inequality. The results suggest that the Stolper-Samuelson framework does not hold in the context of the SADC region. The study concludes that international trade, coupled with technological change, increases wage inequality and, therefore, calls for policy measures to address the unequal distribution of trade benefits in the SADC region.