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Trade-Induced Skill Polarization

Author

Listed:
  • Gu, Grace
  • Malik, Samreen
  • Pozzoli, Dario

    (Department of Economics, Copenhagen Business School)

  • Rocha, Vera

    (Department of Innovation, Copenhagen Business School)

Abstract

We study how the skill distribution in an economy responds to changes in wage gaps induced by trade integration. Using administrative data for Denmark (1993-2012), we conduct a two-step empirical analysis. In the first step, we predict changes in wage gaps that are triggered by exogenous trade shocks. In the second step, we estimate the impact of such changes on the skill distribution. The main results for Denmark show that both the average and the standard deviation of skills increase as a result of trade integration. We then extend our analysis to Portugal, using its administrative data (1993-2012), to shed light on the potential role the labor market and education policy may play in establishing the feedback effect of trade on the skill distribution. Finally, we provide a theoretical intuition to rationalize both sets of results.

Suggested Citation

  • Gu, Grace & Malik, Samreen & Pozzoli, Dario & Rocha, Vera, 2018. "Trade-Induced Skill Polarization," Working Papers 6-2018, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:2018_006
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    Cited by:

    1. Grace Gu & Samreen Malik & Dario Pozzoli & Vera Rocha, 2022. "Chinese import competition, offshoring and servitization," Economic Inquiry, Western Economic Association International, vol. 60(2), pages 901-928, April.
    2. Ria Ivandic & Anne Sophie Lassen, 2023. "Gender Gaps From Labor Market Shocks," Upjohn Working Papers 23-387, W.E. Upjohn Institute for Employment Research.
    3. Ria Ivandic & Anne Sophie Lassen, 2023. "Gender gaps from labor market shocks," CEP Discussion Papers dp1944, Centre for Economic Performance, LSE.
    4. Ivandic, Ria & Lassen, Anne Sophie, 2023. "Gender gaps from labor market shocks," LSE Research Online Documents on Economics 121285, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    skill polarization; skill upgrading; trade integration and labor market frictions;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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