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

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  • Leonardo Gasparini

    ()
    (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) FCE - UNLP)

  • Pablo Acosta

    ()
    (University of Illinois at Urbana Champaign)

Abstract

Capital accumulation can modify the relative productivity between skilled and unskilled workers, thus leading to changes in the wage structure. In particular, if capital goods are relatively more complementary to skilled workers in the production function (skill-biased technologies), a positive correlation between investment in physical capital and the wage premium would be expected. In this paper we present evidence for this hypothesis by taking advantage of the variability in wage premia and capital investment across industries in the Argentine manufacturing sector. We conclude that the wage premium for workers with complete college education increased more in those industries with higher investment in machinery and equipment. As in Galiani and Sanguinetti (2003, in this journal), the wage premium also grew more in those sectors which faced strong import competition, although this effect is empirically less relevant than the capital accumulation effect.

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Bibliographic Info

Paper provided by CEDLAS, Universidad Nacional de La Plata in its series CEDLAS, Working Papers with number 0005.

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Length: 15 pages
Date of creation: Jan 2004
Date of revision:
Handle: RePEc:dls:wpaper:0005

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Web page: http://cedlas.econo.unlp.edu.ar/
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Keywords: wage premium; capital accumulation; technological change; trade liberalization; wage inequality; Argentina.;

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References

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  1. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, 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. 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.
  4. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
  5. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  6. Sebastian Galiani & Pablo Sanguinetti, 2003. "The Impact of Trade Liberalization on Wage Inequality: Evidence from Argentina," Working Papers 65, Universidad de San Andres, Departamento de Economia, revised Oct 2003.
  7. 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.
  8. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  9. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Castro, Lucio & Olarreaga, Marcelo & Saslavsky, Daniel, 2007. "The impact of trade with China and India on Argentina's manufacturing employment," Policy Research Working Paper Series 4153, The World Bank.
  2. Leonardo Gasparini & Nora Lustig, 2011. "The Rise and Fall of Income Inequality in Latin America," CEDLAS, Working Papers 0118, CEDLAS, Universidad Nacional de La Plata.
  3. López Bóo, Florencia, 2010. "Returns to Education and Macroeconomic Shocks: Evidence from Argentina," IZA Discussion Papers 4753, Institute for the Study of Labor (IZA).
  4. 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.
  5. Tebaldi, Edinaldo & Kim, Jongsung, 2008. "Two Tales on the Returns to Education: The Impact of Trade on Wages," MPRA Paper 9698, University Library of Munich, Germany.
  6. Leonardo Gasparini, 2003. "Argentina´s Distributional Failure: The role of Integration and Public Policies," CEDLAS, Working Papers 0001, CEDLAS, Universidad Nacional de La Plata.
  7. Gasparini, Leonardo & Galiani, Sebastian & Cruces, Guillermo & Acosta, Pablo A., 2011. "Educational Upgrading and Returns to Skills in Latin America: Evidence from a Supply-Demand Framework, 1990-2010," IZA Discussion Papers 6244, Institute for the Study of Labor (IZA).
  8. 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.
  9. Lucio Castro, 2005. "Tango with the Dragon: Employment Effects of Trade Integration with China. The Case of Argentina," International Trade 0509004, EconWPA.
  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. 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).
  13. Leonardo Gasparini, 2003. "Argentina's Distributional Failure: The Role of Integration and Public Policy," IDB Publications 42798, Inter-American Development Bank.

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