Our Programmes



Sign up to our newsletter.

Follow ODI

Trade liberalisation does not always raise wage premia: evidence from Ugandan districts

Working paper

Written by Massimiliano Cali

Working paper

The process of economic integration over the past two decades has been accompanied by an expanding income wedge between skilled and unskilled workers in many developing countries. This was also the case for Ugandan wage employees during the 1990s, which was a period of abrupt trade opening and market reforms. This is a surprising result for an unskilled labor abundant country like Uganda in light of a standard Heckscher-Ohlin (H-O) framework. But was the trade opening responsible for the increase in wage premia? By using a novel district-level analysis, I find that in fact increased trade reduced the returns to schooling in line with the H-O predictions. On the other hand, the intensification of domestic trade across districts during the period was associated with higher returns in those districts relatively endowed with skilled employees. This effect appears to be responsible for at least some of the rising returns to schooling among wage employees in Uganda.

  • Trade Liberalisation Does Not Always Raise Wage Premia: Evidence from Ugandan Districts

    Download file
Massimiliano Cali