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International Trade, Technology, and the Skill Premium

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  • Ariel Burstein
  • Jonathan Vogel

Abstract

What are the consequences of international trade on the skill premium? We incorporate skill-intensity differences across firms and sectors into a standard model of international trade. Reductions in trade costs reallocate factors toward a country's comparative advantage sectors, increasing the skill premium in countries with a comparative advantage in skill-intensive sectors and decreasing it elsewhere. Reductions in trade costs also reallocate factors toward more productive and skill-intensive firms within sectors and toward skill-intensive sectors in all countries, increasing the skill premium in all countries. Quantitatively, we find that trade liberalization increases the skill premium in almost all countries.

Suggested Citation

  • Ariel Burstein & Jonathan Vogel, 2017. "International Trade, Technology, and the Skill Premium," Journal of Political Economy, University of Chicago Press, vol. 125(5), pages 1356-1412.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/693373
    DOI: 10.1086/693373
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