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Two Tales on the Returns to Education: The Impact of Trade on Wages

  • Edinaldo Tebaldi
  • Jongsung Kim

This paper uses micro data from the Current Population Survey combined with data from the US International Trade Commission and Bureau of Economic Analysis to evaluate the impacts of international trade (import penetration and export intensiveness) on wages with a special focus on the returns to education. Consistent with the literature, our empirical analysis provides evidence that the wage rates of similarly skilled workers differ across net-exporting, net-importing, and nontradable industries. Our results add to the literature by showing that the wage gap usually found across importing and exporting industries vanishes for highly skilled workers (workers with college degree and beyond) when we control for the cross-effect between international trade and education, but the wage gap due to international trade still persists for low-skilled workers. This finding supports the view that education serves as an equalizer and counterbalances the adverse impact from import penetration on wages of highly skilled workers. Copyright (C) 2010 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 14 (2010)
Issue (Month): 4 (November)
Pages: 768-782

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Handle: RePEc:bla:rdevec:v:14:y:2010:i:4:p:768-782
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  1. Berman, E. & Bound, J. & Machin, S., 1997. "Implications of Skill-Biased Technological Change: International Evidence," Papers 25, Centre for Economic Performance & Institute of Economics.
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  8. Bruce Elmslie & Edinaldo Tebaldi, 2007. "Sexual Orientation and Labor Market Discrimination," Journal of Labor Research, Springer, vol. 28(3), pages 436-453, July.
  9. Pablo Acosta & Leonardo Gasparini, 2007. "Capital Accumulation, Trade Liberalization, and Rising Wage Inequality: The Case of Argentina," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 793-812.
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