Trade liberalisation, rent sharing and wage inequality in Tunisia, 1998-2002

This paper attempts to empirically explore the effects of trade liberalization process in Tunisia on average real wages and wage inequality, via industry rents. For this purpose, we adopt, following Revenga (1997), a flexible model of wage setting that can accommodate both the presence of rent-sharing behavior and competitive wage determination. The rent- sharing mechanism may affect firms’ employment response to trade liberalization. Indeed, bargaining workers could accept a reduction in wages subsequent to rent dissipation in order to preserve jobs. We assess this hypothesis by regressing a labor demand function derived from a model of employment determination that integrates trade impacts, following Mouelhi (2007).