The Impacts of Trade Liberalization on the Wage Inequality (the Case Study of Iran 1380-1382)

Evidences indicate that openness of economy play a remarkable role in the formation of relative wages in the world. In this paper on the base of Stolper- Samuelson theory, we investigate the effects of trade liberalization and tariff reduction on wages inequality in Iran. In order to test and quantify the relationship, we have used a panel limited dependent Tobit model which is estimated by MLE. Our data consist of the micro data on households’ socioeconomic surveys (1380-1382) and aggregate data on the tariff rates of different sectors in economic activities according to ISIC four digits codes. We found evidences in the favor of our hypothesis in which reduction in tariff rates contribute to an increase in the wage gap in Iran. Trade liberalization causes a reduction in the wage of unskilled workers and benefits the skilled groups workers.