Gender Wage Discrimination and Trade Openness

Abstract This paper introduces employer taste-discrimination in an open economy model with imperfect competition and endogenous gender wage gap. Firms operate in an oligopoly where rents are positive and prejudiced employers can use their market power to pay men a premium, in line with Becker's theory. Trade openness affects employers' ability to discriminate. However the direction of the impact depends on trade partners' characteristics, in particular their competitive advantage. While penetration of foreign firms in the domestic market triggers a surge in competition thus heightening incentives to reduce costs, an easier access to foreign markets is an opportunity to enhance profits and may increase discrimination. The model is confronted with data for Uruguayan manufacturing sectors that experienced a sharp liberalization of trade in the 1990s. Market access of Uruguayan firms as well as competitors' access to the Uruguayan market, at the industry level, are used for the first time to assess the impact of trade openness on the gender wage gap in a specification inspired by the theoretical analysis