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The Skill Bias of World Trade

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Author Info
Epifani, Paolo () (Universitá di Parma)
Gancia, Gino (Institute for International Economic Studies, Stockholm University)

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Abstract

We argue that, with an elasticity of substitution in consumption greater than one and higher scale economies in the skill-intensive sectors, the entire volume of world trade matters for wage inequality. This implies that trade integration, even among identical countries, is likely to increase the skill premium. This result can also explain the increase in skill premia in developing countries that have experienced drastic trade liberalizations. Further, we argue that evidence of a falling relative rpice of skill-intensive goods can be reconciled with the fast growth of world trade and that the intersectoral mobility of capital exacerbates the effect of trade on inequality. We provide new empirical evidence in support of our results and a quantitative assessment of the skill bias of world trade.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 707.

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Length: 31 pages
Date of creation: 24 Mar 2002
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Handle: RePEc:hhs:iiessp:0707

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Related research
Keywords: Skill Premium Scale Effect Intra-Industry and Inter-Industry Trade

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies

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Full references

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. Carlo Devillanova & Michele Di Maio & Pietro Vertova, 2006. "Labour Mobility, Capital-Skill Complementarity and the Redistributive Effects of Trade Integration," CESPRI Working Papers 188, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Nov 2006. [Downloadable!]
  2. Alessandra Bonfiglioli, 2005. "Equities and Inequality," Economics Working Papers 947, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  3. Paolo Epifani & Gino Gancia, 2004. "Increasing Returns, Imperfect Competition and Factor Prices," Economics Working Papers 953, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2005. [Downloadable!]
    Other versions:
  4. Bulent Unel, . "Firm Heterogeneity, Trade, and Wage Inequality," Departmental Working Papers 2008-02, Department of Economics, Louisiana State University. [Downloadable!]
  5. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 709-728, June. [Downloadable!] (restricted)
    Other versions:
  6. Wilfred J. Ethier, 2002. "Globalization, Globalisation," Tinbergen Institute Discussion Papers 02-088/2, Tinbergen Institute. [Downloadable!]
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