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Capital Accumulation, Trade Liberalization, and Rising Wage Inequality: The Case of Argentina

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  • Pablo Acosta
  • Leonardo Gasparini

Abstract

Capital accumulation can modify the relative productivity between skilled and unskilled workers, leading to changes in the wage structure. In particular, if capital goods are relatively more complementary to skilled workers, a positive correlation between investment in physical capital and the wage premium would be expected. In this article, we present evidence for this hypothesis by taking advantage of the variability in wage premia and capital investment across industries in Argentina’s manufacturing sector. We conclude that the wage premium for skilled workers increased more in those industries with higher investment in machinery and equipment. The overall evidence seems to indicate that industry affiliation is an important determinant of earnings differentials by skill group.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/516764
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Bibliographic Info

Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 55 (2007)
Issue (Month): ()
Pages: 793-812

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Handle: RePEc:ucp:ecdecc:v:55:y:2007:p:793-812

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  1. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  2. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155.
  3. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
  4. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  5. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  6. Pabo Sanguinetti & Sebastian Galiani, 2003. "The impact of trade liberalizationon wage inequality:Evidence from Argentina," Department of Economics Working Papers 011, Universidad Torcuato Di Tella.
  7. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, National Bureau of Economic Research, Inc.
  8. David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc.
  9. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
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Citations

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Cited by:
  1. Choi, E. Kwan, 2011. "To integrate with a high- or low-wage country: That is the question," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 792-799, October.
  2. Leonardo Gasparini, 2003. "Argentina´s Distributional Failure: The role of Integration and Public Policies," CEDLAS, Working Papers 0001, CEDLAS, Universidad Nacional de La Plata.
  3. Gasparini, Leonardo & Galiani, Sebastian & Cruces, Guillermo & Acosta, Pablo, 2011. "Educational upgrading and returns to skills in Latin America : evidence from a supply-demand framework, 1990-2010," Policy Research Working Paper Series 5921, The World Bank.
  4. Castro, Lucio & Olarreaga, Marcelo & Saslavsky, Daniel, 2006. "The impact of trade with China and India on Argentina’s manufacturing employment," MPRA Paper 538, University Library of Munich, Germany.
  5. Leonardo Gasparini & Nora Lustig, 2011. "The Rise and Fall of Income Inequality in Latin America," Working Papers 1110, Tulane University, Department of Economics.
  6. López Bóo, Florencia, 2010. "Returns to Education and Macroeconomic Shocks: Evidence from Argentina," IZA Discussion Papers 4753, Institute for the Study of Labor (IZA).
  7. Leonardo Gasparini, 2003. "Argentina's Distributional Failure: The Role of Integration and Public Policy," IDB Publications 42798, Inter-American Development Bank.
  8. Edinaldo Tebaldi & Jongsung Kim, 2010. "Two Tales on the Returns to Education: The Impact of Trade on Wages," Review of Development Economics, Wiley Blackwell, vol. 14(4), pages 768-782, November.
  9. Castro, Lucio & Saslavsky, Daniel, 2008. "Trade with China and India and Manufacturing Labour Demand in Argentina," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  10. Lucio Castro & Daniel Saslavsky, 2005. "Trade, Poverty and Employment: The Social Consequences of Integration with China," International Trade 0512017, EconWPA.
  11. Ricardo Bebczuk, 2009. "SME Access to Credit in Guatemala and Nicaragua: Challenging Conventional Wisdom with New Evidence," CEDLAS, Working Papers 0080, CEDLAS, Universidad Nacional de La Plata.
  12. Demombynes, Gabriel & Metzler, Johannes, 2008. "Connecting the unobserved dots : a decomposition analysis of changes in earnings inequality in urban Argentina, 1980-2002," Policy Research Working Paper Series 4624, The World Bank.
  13. Lucio Castro, 2005. "Tango with the Dragon: Employment Effects of Trade Integration with China. The Case of Argentina," International Trade 0509004, EconWPA.

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