Dix-Carneiro and Kovak Trade Reform and Regional Dynamics in RAIS before 1995, we focus on monthly earnings rather than hourly wages in the RAIS analysis. We supplement these results with monthly earnings and hourly wages calculated using the Census.

First, we calculate regional earnings premia, adjusted for any compositional changes in the regional workforce. For each year, we regress workers’ log December earnings on demographic and educational controls, industry fixed effects, and region fixed effects. These regional fixed effect coefficient estimates then reflect the earnings premium a worker receives in the relevant region, beyond what would be expected given their other observable characteristics. By separately estimating these regressions in each year, we allow for changes in the regional composition of workers and changes in the returns to worker characteristics over time.<sup>23</sup> This approach ensures that our results are not driven by secular growth or decline of industries, changing discrimination, changes in the returns to schooling, or any other changes in the returns to observable characteristics that operate at the national level. Our dependent variable is then the change in log regional earnings premium from 1991 to each subsequent year, 1992 to 2010.

Table 1 shows the results of estimating (4) for regional formal sector earnings and wages. All estimates for the coefficient on _RTCr_ are positive, indicating that regions facing larger tariff declines experience relative earnings or wage declines. Consider Panel A, which presents earnings estimates using the RAIS data. Columns (1) to (3) examine changes in earnings from 1991 to 2000, while columns (4) to (6) examine changes from 1991 to 2010. Columns (2) and (4) add state fixed effects, and columns (3) and (6) add pre-trend controls for the change in the regional formal earnings premium from 1986 to 1990. The coefficient estimate of 0.358 in column (3) indicates that a region facing a 10 percentage point larger tariff decline (approximately the 90-10 gap in _RTCr_ ) experienced a 3.58 percentage point larger proportional decline (smaller increase) in the regional formal earnings premium.

A striking feature of Table 1 is the sharp increase in liberalization’s effect on earnings from 2000 to 2010. This indicates that the divergent earnings growth in regions facing different tariff declines continued well beyond the liberalization period. Figure 4 confirms this pattern by plotting the evolution of _θt_ in (4). Each point on the figure corresponds to a regression coefficient like those in Table 1, where the dependent variable is the change in earnings premium from 1991 to the year listed on the x-axis. The vertical dashed line indicates that liberalization was complete in 1995. We present coefficient estimates for 1992-94, but these should be interpreted with care, as liberalization was still ongoing. However, the majority of the tariff cuts were implemented by 1993, so these early coefficients are still informative regarding liberalization’s short run effects.<sup>24</sup> The local earnings effects of liberalization steadily grow for more than a decade, before leveling off in the late 2000s.

This increasing pattern is very robust to details of the specification, including trimming earnings outliers, restricting the sample based on worker skill, focusing on tradable or nontradable

> 23Alternatively, we can control for _constant, unobservable_ worker heterogeneity by pooling across years and including individual fixed effects. As shown in Section 5.3, the results are very similar.

> 24 2 When regressing _RTCr_ on an alternate version measuring tariff changes from 1990-93, the _R_ is 0.93.

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