Trade Liberalization and the Lead Role of Human Capital and Job Attributes in Wage Determination: The Case of Pakistan’s Labor Market

Abstract

This study analyzes the role of human capital and job attributes, i.e., supply-side determinants, in determining wages in a period of trade liberalization. Using the Mincerian earning function and based on data from the Labor Force Surveys, we construct a model to estimate various wage determinants and compute the rates of return to different educational qualifications and relative occupational wage shares for the years 2005/06 and 1990/91. The estimated earning functions for 1990/91 and 2005/06 are compared to investigate whether individual characteristics-such as gender, job location, nature of job, educational qualifications, and different occupations-cause the wage gap to widen or contract under conditions of trade liberalization. The mean and quantile regression approach is used for estimation purposes. Our key findings postulate (i) an increasing gender pay gap, (ii) a higher wage premium to the highest educational qualification, and (iii) more or less stable relative wages for different occupations over time. In addition, wage dispersion across occupational groups appears more pronounced in 1990/91 than in 2005/06, implying a declining trend in the difference in wage distribution across occupations. Our findings suggest that trade liberalization cannot be presumed to pose a threat to the labor market in the wage context. However, exposing labor to an open market has not increased the productivity and skills of labor or helped reap the potential benefits of trade liberalization. JEL Classification: F16, J31.

Sectoral and regional impacts of trade liberalization on the skilled-unskilled wage-gap in Pakistan

“…The standard Heckscher-Ohlin (H-O) theory posits that a country exports goods in which its economy makes intensive use of its abundant factor, while importing goods in which its scarce factor is 1 In previous studies of Pakistan, Salman and Javed [22] and Yasmin [23] studied the effect of trade liberalization on wage inequality among professional and unskilled people using two labor force surveys (LFS-1996& LFS-2005 and (LFS 1990(LFS -1991(LFS & 2005(LFS -2006, and these studies used import penetration ratio, export penetration ratio and comparative price for trade liberalization measures respectively. The following are the drawbacks of previous studies that used different proxies rather than import tariffs.…”

Composite Appraisal of Women Development in Selected Thirty-six Countries with Special Focus on Pakistan: Applying Grey Incidence Analysis Model

“…Relevant studies that are necessary to set out the outset of the study are reported in this article. Avalanche of published literature can be witnessed on women development across the globe including: identifying the capabilities of women's leadership and sustainable development in Colombia (Barrios et al, 2020), exploring the relationship between female directorship and firm performance in France (Bennouri et al, 2018), gender inequality in assets ownership in Latin America (Deere et al, 2010), wage gaps of female-male among salaried workers in India (Deshpande et al, 2018;Lee & Wie, 2017;Menon & Rodgers, 2009), uncovered opportunities and barriers of female employment in sports in UK (Forsyth et al, 2019), women segregation in tourism employment in APEC region (Hutchings et al, 2020), women empowerment in East Africa (Miedema et al, 2018), women empowerment in Nepal (O'Hara & Clement, 2018), women asset ownership in rural south-east and north-east Nigeria (Oladokun et al, 2018), participation of Saudi women in development index (Omair et al, 2020), gender wage gap in Mexico (Popli, 2013), gender wage discrimination in Pakistan (Sabir & Aftab, 2007;Yasmin, 2009), gender wage inequality between 1992-2014 in Sri Lanka (Seneviratne, 2020), role of female directors and stock price in China (Shahab et al, 2020), women's social and financial empowerment in Pakistan (Tahir et al, 2018) and gender wage gap in Philippines (Zveglich Jr. et al, 2019). Bennouri et al (2018) examined the data of 394 French firms and affirmed that there is a positive relationship between female board directorship and firm performance; similar finding have been found by Nekhili & Gatfaoui (2013) and Peni (2014).…”

Ascertaining Impact Of Economic Conditions Of Pakistan On Women Working In Industrial Sector Of Karachi

“…With weak economy and low income generating activities in the formal sector, the increased work burden is leading to further exploitation of women. An empirical study by Yasmin (2009) found an increasing gender pay gap during the period of trade liberalisation. But the study does not link it to trade liberalisation rather, it is suggested that the labour supply needs to be adjusted according to the needs of the market.…”

“…The study shows that the average wage in all educational categories is successively higher than that of workers with no formal education and the rate of return also tends to increase from lower to higher with the degree of education over time. It is therefore suggested that literacy levels must be in accordance with the new demands of technically-induced trade liberalisation (Yasmin, 2009). Some researchers also identify that the wage gap and limitations of women to some jobs is not due to 'glass ceilings' because there is little evidence for it.…”