PUBLICATIONS & REPORTS

Contents Introduction

This paper uses data from the Philippines to examine the impact of trade on workers. The empirical analysis is based on two exercises. The first uses industry-level panel data from the Philippines’ manufacturing sector to examine how trade has affected total employment and average wages in 28 manufacturing industries. A key result which emerges is that greater openness - whether measured in terms of increasing trade shares or reduction in average tariff rates - has had a weak impact on total employment and average real wages. Our second exercise, which uses labor force survey data and explicitly recognizes the significant degree of heterogeneity in worker characteristics, examines the effects of trade on wage inequality between educated and relatively uneducated workers. While an increase in the supply of education is found to be an important factor in exerting downward pressure on wage inequalities in the Philippines, our results also indicate that the expansion of trade has led to an increase in the relative demand for unskilled workers as standard trade models would predict.