Economic Globalization, Wages and Wage Inequality in Tunisia: An ARDL Bounds Testing Approach

Abstract

This article conducts an empirical investigation on the impact of economic globalization, that is, international trade and foreign direct investment (FDI), on the level and structure of real wages in Tunisia. In a first step, we look at the effects of economic globalization on the average real wage in the whole economy. Then, the same relationships are checked in manufacturing industries. In a second step, we assess the impacts of international trade and FDI on the evolution of wage inequality. To do this, the recently developed autoregressive distributed lag bounds testing approach to cointegration is conducted on annual data covering the period 1970–2009. This approach allows simultaneously investigating the long-run relationships as well as the short-run dynamic adjustments toward the equilibrium. Based on the econometric analysis, three main findings have been put forward. First, international trade positively affects the economy-wide average wage only in the long-run. On the contrary, FDI flows exert no effects. The second finding is that international trade and FDI positively affect only the most exporting industry in the country, that is, the textiles, clothing and leather industry. Finally, our results do not give support to the predictions of the Heckscher–Ohlin and Stolper–Samuelson theorem, since wefound weak empirical evidence that economic globalization reduces wage inequality between skilled and unskilled workers.