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Working Paper
When Trade Compresses: The Impact of Liberalization on Wage Inequality
We study the effects of trade liberalization on the full wage distribution, exploiting Spain's 1993 entry into the European Single Market. Using employer-employee data, we identify the causal effects of trade across the entire wage distribution, using a novel shift-share instrument embedded in an unconditional quantile regression. We find that the liberalization reduced wage inequality, leading to wage compression through earnings gains at the bottom of the distribution and wage losses at the top. We trace this compression to two asymmetric channels: import competition disproportionately ...