This paper addresses a complex of globalization issues: the effect of globalization on the skill premium; the effect of globalization on unemployment; the relative importance of globalization and exogenous technical change; the effect of globalization on the ability of national governments to conduct independent social policies. Thinking about these topics has been dominated by a large empirical literature concluding that trade has played a relatively minor role in the rise of the skill premium, while exogenous skill-biased technical change has played a major role. This paper replaces the focus on inter-sectoral substitution at the heart of the Stolper-Samuelson theorem with attention to intra-sectoral relations between inputs. Specifically, I assume that out-sourcing and unskilled labor are highIy substitutable and that equipment and skilIed labor are complementary , that production methods are flexible, and that the country undertaking out-sourcing has a significantIy different structure from that providing it. Globalization then offers a simple and immediate possible explanation for the prominent stylized facts regarding the emergence of the skill premium and for the presence of skill-biased technical change. Trade vs. technology remains as an empirical issue, though, because exogenous neutral technological change offers an alter-native possible explanation.
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Epifani, Paolo & Gancia, Gino, 2002.
"The Skill Bias of World Trade,"
Seminar Papers
707, Stockholm University, Institute for International Economic Studies.
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Other versions:
Paolo Epifani & Gino Gancia, 2002.
"The Skill Bias of World Trade,"
CESPRI Working Papers
129, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Mar 2001.
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