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Skill Upgrading and the Real Exchange Rate

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Author Info
Roberto Álvarez
Ricardo A. López

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Abstract

This paper examines the effect of changes in the real exchange rate on skill upgrading in the case of Chile. Using plant-level data from the manufacturing sector we find that a real depreciation increases the share of skilled workers in the total wage bill in exporters but not in non-exporters. This result suggests that depreciations or, more generally, increases in export profitability, may induce exporters to adopt more skilled-intensive technologies. This finding gives support to recent models of trade that highlight the possible effect of the real exchange rate on skill upgrading and wage inequality. This paper also finds that real depreciations increase plants’ export intensity, suggesting that skill upgrading for already exporters is the channel through which real exchange depreciations affect wage inequality.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 519.

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Date of creation: Jun 2009
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Handle: RePEc:chb:bcchwp:519

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  1. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June. [Downloadable!] (restricted)
  2. Francisco Gallego, 2006. "Skill Premium in Chile: Studying the Skill Bias Technical Change Hypothesis in the South," Working Papers Central Bank of Chile 363, Central Bank of Chile. [Downloadable!]
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  4. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August. [Downloadable!] (restricted)
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  5. David Greenaway, & Richard Kneller, & Xufei Zhang, . "Exchange Rates and Exports: Evidence from Manufacturing Firms in the UK," Discussion Papers 07/13, University of Nottingham, GEP. [Downloadable!]
  6. Guillaumont Jeanneney, S. & Hua, P., 2001. "How does real exchange rate influence income inequality between urban and rural areas in China?," Journal of Development Economics, Elsevier, vol. 64(2), pages 529-545, April. [Downloadable!] (restricted)
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  7. Verhoogen, Eric A., 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," CEPR Discussion Papers 6385, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September. [Downloadable!] (restricted)
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  11. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," NBER Working Papers 12885, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. 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. [Downloadable!]
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  13. Robertson, Raymond, 2003. "Exchange rates and relative wages: evidence from Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 25-48, March. [Downloadable!] (restricted)
  14. Linda Goldberg & Joseph Tracy & Stephanie Aaronson, 1999. "Exchange Rates and Employment Instability: Evidence from Matched CPS Data," American Economic Review, American Economic Association, vol. 89(2), pages 204-210, May. [Downloadable!] (restricted)
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  16. Pablo Acosta & Gabriel V. Montes-Rojas, 2008. "Trade Reform and Inequality: The Case of Mexico and Argentina in the 1990s," The World Economy, Blackwell Publishing, vol. 31(6), pages 763-780, 06. [Downloadable!] (restricted)
  17. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January. [Downloadable!] (restricted)
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  20. Sarah Guillou, 2008. "Exports and exchange rate : a firm-level investigation," Documents de Travail de l'OFCE 2008-02, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  21. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, vol. 71(2), pages 311-328, August. [Downloadable!] (restricted)
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  22. Leamer, Edward E. & Maul, Hugo & Rodriguez, Sergio & Schott, Peter K., 1999. "Does natural resource abundance increase Latin American income inequality?," Journal of Development Economics, Elsevier, vol. 59(1), pages 3-42, June. [Downloadable!] (restricted)
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