Impacts of import tariff cuts on wage inequality in Iran

Economic liberalization as a combined process for economic integration has innumerable impacts on labor markets. In this process, labor market moves toward greater flexibility and widening transparencies. As a result of the acquired changes in the labor markets arising from trade openness, have also affected the demand for various workforces (skilled and unskilled labors) and their rate of wages. This paper assesses the impacts of tariff cuts on wage inequality in Iran by applying the famous Heksher-Ohleen and Stapler-Samuelson theories. To address these issues, a computable general equilibrium (CGE) modeling approach has been applied. Results show that general import tariff cuts are decreasing wages inequality, while tariff cuts in unskilled labor-intensive commodities such as those of agricultural commodities lead to an increase in wages inequality. However, under the effect of the tariff cuts in skilled labor-intensive commodities like food, apparel and textile, wage inequality decreases.

Keywords:

Tariff cuts , wages inequality , Computable General Equilibrium