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

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Author Info
Leonardo Gasparini () (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata)
Pablo Acosta () (University of Illinois at Urbana Champaign)

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

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

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Related research
Keywords: wage premium; capital accumulation; technological change; trade liberalization; wage inequality; Argentina.;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins Of Technology-Skill Complementarity," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 693-732, August. [Downloadable!] (restricted)
    Other versions:
  2. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  3. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March. [Downloadable!] (restricted)
    Other versions:
  4. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March. [Downloadable!] (restricted)
  5. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Galiani, Sebastian & Sanguinetti, Pablo, 2003. "The impact of trade liberalization on wage inequality: evidence from Argentina," Journal of Development Economics, Elsevier, vol. 72(2), pages 497-513, December. [Downloadable!] (restricted)
    Other versions:
  7. 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. [Downloadable!]
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  8. David H. Autor & Frank Levy & Richard J. Murnane, 2002. "Upstairs, downstairs: Computers and skills on two floors of a large bank," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(3), pages 432-447, April.
  9. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lucio Castro, 2005. "Tango with the Dragon: Employment Effects of Trade Integration with China. The Case of Argentina," International Trade 0509004, EconWPA. [Downloadable!]
  2. 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. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!]
  4. Leonardo Gasparini, 2003. "Argentina´s Distributional Failure: The role of Integration and Public Policies," Working Papers 0001, CEDLAS, Universidad Nacional de La Plata. [Downloadable!]
  5. Lucio Castro & Daniel Saslavsky, 2005. "Trade, Poverty and Employment: The Social Consequences of Integration with China," International Trade 0512017, EconWPA. [Downloadable!]
  6. 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. [Downloadable!]
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