This paper sheds light on the heterogeneous impact of international trade on the gender wage gap by introducing employer taste-based discrimination in an open economy model with imperfect competition. Firms operate in an oligopoly where prejudiced employers can use their rents to pay men a premium, in line with Becker’s theory. The penetration of foreign products in the domestic market triggers a rise in competition. To maintain their market shares firms have to cut down their labour costs, reducing the average gender wage gap. However, greater access to foreign markets is also an opportunity for domestic firms to increase their profits. The model shows under which conditions new export opportunities enable discriminatory firms to maintain wage gaps.
Ben Yahmed, Sarra (2012), Gender Wage Discrimination and Trade Openness: prejudiced employers in an open industry, AMSE Working Paper No. 33, Aix-Marseille School of Economics. Download