International trade and wage inequality: A non-monotonic relationship

In this paper, I empirically examine the non-monotonic relationship between openness and within-group wage inequality predicted by  Helpman et al. (2010) using a panel data for the US, 1983–2005. Within-group wage inequality is measured for each industry and matched with exports. It can be shown that after controlling for year fixed effects, industry fixed effects and labor compositions, within-group wage inequality first increases with the degree of openness and then decreases. The average turning point, measured by the ratio of exports to domestic sales, is around 0.3–0.35. The results are robust to various measures of within-group wage inequality.