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

  • Leonardo Gasparini

    ()

    (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) FCE - UNLP)

  • Pablo Acosta

    ()

    (University of Illinois at Urbana Champaign)

Capital accumulation can modify the relative productivity between skilled and unskilled workers, thus leading to changes in the wage structure. In particular, if capital goods are relatively more complementary to skilled workers in the production function (skill-biased technologies), a positive correlation between investment in physical capital and the wage premium would be expected. In this paper we present evidence for this hypothesis by taking advantage of the variability in wage premia and capital investment across industries in the Argentine manufacturing sector. We conclude that the wage premium for workers with complete college education increased more in those industries with higher investment in machinery and equipment. As in Galiani and Sanguinetti (2003, in this journal), the wage premium also grew more in those sectors which faced strong import competition, although this effect is empirically less relevant than the capital accumulation effect.

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Paper provided by CEDLAS, Universidad Nacional de La Plata in its series CEDLAS, Working Papers with number 0005.

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Length: 15 pages
Date of creation: Jan 2004
Date of revision:
Handle: RePEc:dls:wpaper:0005
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Web page: http://cedlas.econo.unlp.edu.ar/

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  1. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, 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. Galiani, Sebastian & Sanguinetti, Pablo, 2003. "The impact of trade liberalization on wage inequality: evidence from Argentina," Journal of Development Economics, Elsevier, vol. 72(2), pages 497-513, December.
  4. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
  5. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
  6. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155, March.
  7. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  8. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, National Bureau of Economic Research, Inc.
  9. 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.
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