Trade Liberalization, Labor Demand Shifts and Earnings Inequality in Singapore

Abstract

This article investigates the relative wage between skilled and low skilled labor in a small open economy with traditionally few labor market rigidities. It looks at the role of relative skills demand and supply in determining skills premium and explores the extent to which trade liberalization affects the skills wage gap. Indications are that greater openness is linked to higher labor demand elasticity and/or technological progress. The evidence also suggests that rapid acceleration in labor demand for skills and trade liberalization has widened the wage gap between skilled and low skilled labor. This result persists regardless of industry type.

Envisioning the Impact of the Belt and Road Initiative on Regional Labor Markets

“…Furthermore, since the optimization and upgrade of industrial structure have accelerated the transfer of labor to high-efficiency sectors, the consistency between labor training and industrial change has become an urgent issue owing to China's dual labor market. Another issue is that rapid acceleration in labor demand for skills and openness will widen the gap between skilled and low skill workers (Toh, 2012). To ensure that labor can adapt to this structural change, education and further training in professional skills should be considered seriously.…”

“…Trade will affect labor force in several different ways. The greater degree of openness and trade liberalization would be linked to labor demand elasticity and technological progress, which would bring labor change [13]. Trade can also bring labor demand by increasing expected income of labor to promote mobility.…”

Educational choice, rural–urban migration and economic development

“…However, the elasticity of substitution between high-and low-skilled labor in developing countries are usually higher. For example, Toh and Tat (2012) estimate that the value for Singapore is 4.249. Te Velde and Morrissey (2004) use data from Singapore, Hong Kong, Korea, the Philippines and Thailand and obtained a value of 2.78.…”

Geography of Inequality in Asia

“…Economic and geographical factors are often emphasized in the debates over convergence and divergence. The spatial distribution of manufacturing, industry location, technological change, and urbanization economies have significantly influenced regional inequalities (Freebairn ; Akita and others ; Toh and Tat ; Rodriguez‐Pose and Hardy ). Industrial concentration in core regions tends to increase spatial inequality in industrialization, a source of deviated income distribution.…”