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Capital Accumulation, Trade Liberalization, and Rising Wage Inequality: The Case of Argentina

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  • Pablo Acosta
  • Leonardo Gasparini

Abstract

Capital accumulation can modify the relative productivity between skilled and unskilled workers, leading to changes in the wage structure. In particular, if capital goods are relatively more complementary to skilled workers, a positive correlation between investment in physical capital and the wage premium would be expected. In this article, we present evidence for this hypothesis by taking advantage of the variability in wage premia and capital investment across industries in Argentina’s manufacturing sector. We conclude that the wage premium for skilled workers increased more in those industries with higher investment in machinery and equipment. The overall evidence seems to indicate that industry affiliation is an important determinant of earnings differentials by skill group.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:ecdecc:v:55:y:2007:p:793-812
    DOI: 10.1086/516764
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Castro, Lucio & Olarreaga, Marcelo & Saslavsky, Daniel, 2006. "The impact of trade with China and India on Argentina’s manufacturing employment," MPRA Paper 538, University Library of Munich, Germany.
    2. Choi, E. Kwan, 2011. "To integrate with a high- or low-wage country: That is the question," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 792-799, October.
    3. Castro, Lucio & Saslavsky, Daniel, 2008. "Trade with China and India and Manufacturing Labour Demand in Argentina," WIDER Working Paper Series 108, World Institute for Development Economic Research (UNU-WIDER).
    4. López Bóo, Florencia, 2010. "Returns to Education and Macroeconomic Shocks: Evidence from Argentina," IZA Discussion Papers 4753, Institute for the Study of Labor (IZA).
    5. Mohammad Reza Farzanegan & Mai Hassan, 2017. "The impact of economic globalization on the shadow economy in Egypt," MAGKS Papers on Economics 201718, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Leonardo Gasparini & Nora Lustig, 2011. "The Rise and Fall of Income Inequality in Latin America," Working Papers 1110, Tulane University, Department of Economics.
    7. Leonardo Gasparini, 2003. "Argentina´s Distributional Failure: The role of Integration and Public Policies," CEDLAS, Working Papers 0001, CEDLAS, Universidad Nacional de La Plata.
    8. repec:spr:laecrv:v:27:y:2018:i:1:d:10.1007_s40503-017-0048-3 is not listed on IDEAS
    9. Leonardo Gasparini & Guillermo Cruces & Leopoldo Tornarolli, 2016. "Chronicle of a Deceleration Foretold: Income inequality in Latin America in the 2010s," CEDLAS, Working Papers 0198, CEDLAS, Universidad Nacional de La Plata.
    10. Leonardo Gasparini, 2003. "Argentina's Distributional Failure: The Role of Integration and Public Policy," IDB Publications (Working Papers) 42798, Inter-American Development Bank.
    11. Edinaldo Tebaldi & Jongsung Kim, 2010. "Two Tales on the Returns to Education: The Impact of Trade on Wages," Review of Development Economics, Wiley Blackwell, vol. 14(4), pages 768-782, November.
    12. Lucio Castro & Daniel Saslavsky, 2005. "Trade, Poverty and Employment: The Social Consequences of Integration with China," International Trade 0512017, EconWPA.
    13. Gasparini, Leonardo & Galiani, Sebastian & Cruces, Guillermo & Acosta, Pablo, 2011. "Educational upgrading and returns to skills in Latin America : evidence from a supply-demand framework, 1990-2010," Policy Research Working Paper Series 5921, The World Bank.
    14. Lucio Castro, 2005. "Tango with the Dragon: Employment Effects of Trade Integration with China. The Case of Argentina," International Trade 0509004, EconWPA.
    15. Ricardo Bebczuk, 2009. "SME Access to Credit in Guatemala and Nicaragua: Challenging Conventional Wisdom with New Evidence," CEDLAS, Working Papers 0080, CEDLAS, Universidad Nacional de La Plata.
    16. Demombynes, Gabriel & Metzler, Johannes, 2008. "Connecting the unobserved dots : a decomposition analysis of changes in earnings inequality in urban Argentina, 1980-2002," Policy Research Working Paper Series 4624, The World Bank.
    17. Juan Guerra-Salas, 2016. "Fiscal Policy, Sectoral Allocation, and the Skill Premium: Explaining the Decline in Latin America’s Income Inequality," Working Papers Central Bank of Chile 779, Central Bank of Chile.
    18. Sebastian Galiani & Guillermo Cruces & Pablo Acosta & Leonardo C. Gasparini, 2017. "Educational Upgrading and Returns to Skills in Latin America: Evidence from a Supply-Demand Framework," NBER Working Papers 24015, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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