Trade Liberalisation and Labour Demand within South African Manufacturing Firms

Abstract

Using new detailed tariff data, wages disaggregated by skill level and firm level information, this paper ascertains the relationships between trade, technology and labour demand and investigates the effects of tariff changes on factor prices in South African manufacturing. We find evidence that trade liberalization and technological change have affected the skill structure of employment. Export orientation, raw materials imports, training, investment in computers and firm age are positively associated with the skill intensity of production. We also find that tariff liberalisation raised the return to capital relative to labour, but that the negative impact on labour is concentrated on semiskilled workers. Tariff liberalisation mandated a rise in real returns to unskilled workers.