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Skill Dispersion and Trade Flows

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  • Matilde Bombardini

    ( University of British Columbia, CIFAR, NBER and RCEA)

  • Giovanni Gallipoli

    ( University of British Columbia and RCEA)

  • Germán Pupato

    ( University of British Columbia)

Abstract

Is skill dispersion a source of comparative advantage? While it is established that a country's aggregate endowment of human capital is an important determinant of comparative advantage, this paper investigates whether the distribution of skills in the labor force can play a role in the determination of trade flows. We develop a multi-country, multi-sector model of trade in which comparative advantage derives from (i) differences across sectors in the complementarity of workers' skills, (ii) the dispersion of skills in the working population. First, we show how higher dispersion in human capital can trigger specialization in sectors characterized by higher substitutability among workers' skills. We then use industry-level bilateral trade data to show that human capital dispersion, as measured by a standard international metric, has a signi cant effect on trade flows. We nd that the effect is of a magnitude comparable to that of aggregate endowments. The result is robust to the introduction of several controls for other proximate causes of comparative advantage

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 20_09.

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Date of creation: Jan 2009
Date of revision: Jan 2009
Handle: RePEc:rim:rimwps:20_09

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Citations

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Cited by:
  1. Wenya Cheng & John Morrow & Kitjawat Tacharoen, 2013. "Productivity As If Space Mattered: An Application to Factor Markets Across China," The School of Economics Discussion Paper Series 1320, Economics, The University of Manchester.
  2. Asuyama, Yoko, 2012. "Skill Distribution and Comparative Advantage: A Comparison of China and India," World Development, Elsevier, vol. 40(5), pages 956-969.
  3. Papps, Kerry L. & Bryson, Alex & Gomez, Rafael, 2010. "Heterogeneous Worker Ability and Team-Based Production: Evidence from Major League Baseball, 1920-2009," IZA Discussion Papers 5225, Institute for the Study of Labor (IZA).
  4. Pao-Li Chang & Fali Huang, 2012. "Trade and Divergence in Education Systems," Working Papers 32-2012, Singapore Management University, School of Economics.
  5. Gene M. Grossman, 2013. "Heterogeneous Workers and International Trade," NBER Working Papers 18788, National Bureau of Economic Research, Inc.
  6. Sly, Nicholas, 2010. "Skill Acquisition, Incentive Contracts and Jobs: Labor Market Adjustment to Trade," MPRA Paper 25004, University Library of Munich, Germany.
  7. LATZER, Hélène & MAYNERIS, Florian, 2012. "Income distribution and vertical comparative advantage. Theory and evidence," CORE Discussion Papers 2012034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Bombardini, Matilde & Gallipoli, Giovanni & Pupato, Germán, 2014. "Unobservable skill dispersion and comparative advantage," Journal of International Economics, Elsevier, vol. 92(2), pages 317-329.
  9. Philipp Kircher (University of Edinburgh), 2013. "Matching and Sorting in a Global Economy," ESE Discussion Papers 227, Edinburgh School of Economics, University of Edinburgh.
  10. Wenya Cheng & John Morrow & Kitjawat Tacharoen, 2012. "Productivity as if space mattered: an application to factor markets across China," LSE Research Online Documents on Economics 48930, London School of Economics and Political Science, LSE Library.

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