Trade Liberalization and Wage Inequality in Iran’s Industries

Document Type : Research Paper


1 Associate Professor, Economics, Sharif University of Technology

2 Ph.D. Candidate, Razi University

3 Assistant Professor, Researcher, Institute for Trade Studies & Research


This study examins effects of trade liberalization on the wage inequality across industries and between genders within these industries by utilizing the data of micro-level Households’ Income and Expenditures surveys and trade statistics over 2001-2011. The analysis is carried based on the Heckscher–Ohlin’s theory in international trade and Baker’s taste discrimination theory at firms. We use Quantile regression and ordinary least squares (OLS) to consider the wage discrimination across entire distribution wage distribution and at wages mean as well. The results of Blinder-Oaxaca decomposition approach (inequality at mean wage) and Machado and Mata’s model (inequality of wage at entire distribution) indicate that over the aforementioned period wage gap has decreased. The wage gap in terms of Blinder-Oaxaca and Machado-Mata decomposition models, for sectors with positive and zero tariffs, show that wage difference have experienced considerable reductions over the period of post tariff reduction for between genders and industries.
JEL Classification: J01, J24, J31