This paper examines the impacts of real devaluation, trade liberalization and the growing relative supply of skill on wage dispersion in Colombia’s seven principal cities over 1976-1994. The Hecksher-Ohlin-Samuelson (HOS) framework predicts that while labor supply shifts and devaluation should not affect wage dispersion, trade liberalization should compress wages in LDC’s. My findings differ: growth in the supply of skills lowers, and liberalization and real devaluation raise, wage dispersion. This is not due to failure of the HOS assumptions of factor-diversified trade or that Colombia is skilled relative to the world average. The data are consistent with non-HOS assumptions where devaluation and liberalization encourage capital and embodied technical flows.
Robbins, D. (2016). Trade and wages in Colombia. Estudios De Economía, 24(1), pp. 47–83. Retrieved from https://revistas.uchile.cl/index.php/EDE/article/view/41011
