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Skill Premium in Chile: Studying Skill Upgrading in the South

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  • Francisco Gallego

    ()
    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

The evolution of the skill premium (i.e., the wage di erential between skilled and unskilled workers) has interest from at least two perspectives: it is a rough measure of inequality among workers of di erent quali cations and provides information on the characteristics of the development process of the economy. In this paper, I investigate empirically the evolution of the skill premium in Chile over the last 40 years. After some uctuations in the 1960s and 1970s, the skill premium increased in the 1980s and has remained roughly constant since then. The data suggest that this evolution is an outcome of a signi cant increase in relative demand for skilled workers in the 1980s and 1990s and a sizeable increase in the relative supply in the 1990s. Sectoral evidence shows that, after controlling for sector and time e ects, (i) the relative demand increased faster in the same industries in Chile than in the US and (ii) the correlation is stronger for tradable industries and non-tradable industries that are intensive in imported capital, as expected. This result is consistent with a number of theories that link skill upgrading in developed and developing countries. To try to disentangle among these theories, I present time series evidence suggesting that, after controlling for other determinants of skill premium, not only there is a positive correlation between skill premium in Chile and in the US but also the size of the correlation is consistent with the Acemoglu (2003a) model of endogenous technological choice in which new technologies are produced in developed countries (like the US) and adopted in developing economies(like Chile).

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Bibliographic Info

Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 377.

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Date of creation: 2010
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Handle: RePEc:ioe:doctra:377

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Keywords: Wage premium; skill upgrading; openness; skill biased technical change; Chile;

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References

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Cited by:
  1. Ariel Burstein & Javier Cravino & Jonathan Vogel, 2011. "Importing Skill-Biased Technology," NBER Working Papers 17460, National Bureau of Economic Research, Inc.
  2. Yoshimichi Murakami, 2013. "Trade Liberalization and Skill Premium in Chile," Discussion Paper Series DP2013-19, Research Institute for Economics & Business Administration, Kobe University.

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