A micro-level insight on trade-induced job polarization and poverty in Russia

Abstract

The effect of trade liberalization on workers with different skill levels at distinct types of firms is often surmised to be heterogeneous. This paper employs a longitudinal individual-level dataset—the Russian Longitudinal Monitoring Survey (RLMS)—to study the impact of trade liberalization on the relative poverty of various groups of workers in Russia. More specifically, we use the country’s accession to the World Trade Organization (WTO) as a quasi-natural experiment to analyze the impact of trade liberalization on workers at different skill levels and types of firms. Our analysis reveals significant trade-induced job polarization, meaning that, in the tradable sector, even though employment and wages are increasing for low-wage and the high-wage occupations, they are shrinking for mid-wage occupations, leading to a higher poverty rate for workers seeking employment in mid-wage occupations in that sector. Our results are robust to a battery of robustness checks, and they point to the crucial role of state-owned enterprises in attenuating the adverse effects of trade shocks on the welfare of workers.