International trade and wage inequality: A non-monotonic relationship

In this paper, I empirically examine the non-monotonic relationship between openness and within-group wage inequality predicted by Helpman et al. (2010) using a panel data for the US, 1983-2005. Within-group wage inequality is measured for each industry and matched with exports. It can be shown that after controlling for year fixed effects, industry fixed effects and labor compositions, within-group wage inequality first increases with the degree of openness and then decreases. The average turning point, measured by the ratio of exports to domestic sales, is around 0.3-0.35. The results are robust to various measures of within-group wage inequality. (C) 2013 Elsevier B.V. All rights reserved.