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

  • Pablo Acosta
  • Leonardo Gasparini

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.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/516764
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Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 55 (2007)
Issue (Month): ()
Pages: 793-812

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Handle: RePEc:ucp:ecdecc:v:55:y:2007:p:793-812
Contact details of provider: Web page: http://www.journals.uchicago.edu/EDCC/

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  1. David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc.
  2. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  3. Sebastian Galiani & Pablo Sanguinetti, 2003. "The Impact of Trade Liberalization on Wage Inequality: Evidence from Argentina," Working Papers 65, Universidad de San Andres, Departamento de Economia, revised Oct 2003.
  4. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  5. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins Of Technology-Skill Complementarity," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 693-732, August.
  6. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  7. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155.
  8. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  9. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
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