Trade Adjustment Costs in Developing Countries: - World Bank ...

Trade Reform, Employment Allocation and Worker Flows 119more high-skilled workers because their relative wage declines. Gonzaga et al.(2006) document that Brazil’s skilled earnings differential narrows over the 1990s.Using rich linked employer–employee data that control for unobserved workercharacteristics, Menezes-Filho et al. (2008) show, however, that the skill premiumin wages only changes slightly between 1990 and 1997 (see Table C7.1 inAppendix A). Of course, more research is required to discern this reinterpretationof classic trade theory from alternative explanations. The simultaneous schoolingintensityincrease in every single occupation, above and beyond the sector mean,could also be related to factor-nonneutral technical change or factor pricechanges for substitutes for labor, and not only to international trade in tasks.Yet, the prediction of reinterpreted classic trade theory that foreign trade expandsless schooling-intensive occupations in Brazil’s traded-goods sector is fullyconsistent with the data.Figure 7.4 depicts the nationwide occupation profile within traded-goodssectors and nontraded-output sectors for the years 1986 to 2001. In traded-goodsindustries, skilled blue-collar jobs expand markedly with the conclusion of thefirst wave of trade reforms between 1991 and 1993. The share of skilled bluecollaroccupations increases from below 60 per cent in 1990 to 68 per cent in1994 and to 71 per cent by 2001. Recall from the evidence in Figure 7.2 that theaverage worker’s schooling in both skilled and unskilled blue-collar jobs in thetraded-goods sector is roughly the same. The growing importance of skilled bluecollaroccupations comes at the expense of all other occupations in the tradedgoodsindustries. At the low-skill intensity end, the share of unskilled blue-collaroccupations drops from more than 13 per cent in 1990 to 8 per cent in 1994 (butrecovers slightly to close to 9 per cent by 2001). More importantly, the expansionof skilled blue-collar occupations in traded-goods sectors comes at the expenseof white-collar occupations, whose total employment share drops from 27 perTraded-goods sectorsNontraded-output sectorsFigure 7.4: Occupational workforce compositionSource: Muendler (2008). RAIS 1986–2001 (1 per cent random sample), male workers nationwide, 25to 64 years old, with employment on December 31st.Note: Traded-goods sectors are agriculture, mining and manufacturing (subsectors IBGE 1–13 and 25),nontraded-output sectors are all other industries. Shares based on employment.