IDEAS home Printed from https://ideas.repec.org/p/fip/fedawp/2004-11.html
   My bibliography  Save this paper

Can capital-skill complementarity explain the rising skill premium in developing countries? evidence from Peru

Author

Listed:
  • Joy Mazumdar
  • Myriam Quispe-Agnoli

Abstract

The factors behind the increase in the relative wages of skilled workers in developing countries are still not well understood. The authors use data from Peru to analyze the determinants of within-industry share of skilled workers. They use a translog cost function for gross output and are therefore able to incorporate the effects of materials, both domestic and imported, in addition to capital. The authors find that capital accumulation can explain a large fraction of the increase in the wage bill share and relative wages of skilled labor. This finding is contrary to the commonly held view that unobservable technological change is responsible for the rising skill premium in both developing and developed economies. A test for separability indicates that a gross output cost function is the appropriate one to use, and therefore share equations based on value-added cost functions could be misspecified.

Suggested Citation

  • Joy Mazumdar & Myriam Quispe-Agnoli, 2004. "Can capital-skill complementarity explain the rising skill premium in developing countries? evidence from Peru," FRB Atlanta Working Paper 2004-11, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:2004-11
    as

    Download full text from publisher

    File URL: http://www.frbatlanta.org/filelegacydocs/wp0411.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    2. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    3. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
    4. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers 95-14, California Davis - Institute of Governmental Affairs.
    5. Jaime Saavedra-Chanduví & Máximo Torero, 2000. "Labor Market Reforms and Their Impact on Formal Labor Demand and Job Market Turnover: The Case of Peru," IDB Publications (Working Papers) 3269, Inter-American Development Bank.
    6. Gordon H. Hanson & Ann Harrison, 1999. "Trade Liberalization and Wage Inequality in Mexico," ILR Review, Cornell University, ILR School, vol. 52(2), pages 271-288, January.
    7. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," NBER Working Papers 5693, National Bureau of Economic Research, Inc.
    8. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-468, November.
    9. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, vol. 71(2), pages 311-328, August.
    10. Jaime Saavedra-Chanduví & Máximo Torero, 2000. "Labor Market Reforms and Their Impact on Formal Labor Demand and Job Market Turnover: The Case of Peru," Research Department Publications 3095, Inter-American Development Bank, Research Department.
    11. Berman, Eli & Machin, Stephen, 2000. "Skill-Based Technology Transfer around the World," Oxford Review of Economic Policy, Oxford University Press, vol. 16(3), pages 12-22, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goel, Manisha, 2017. "Inequality Between and Within Skill Groups: The Curious Case of India," World Development, Elsevier, vol. 93(C), pages 153-176.
    2. Caron, Justin & Fally, Thibault & Markusen, James R., 2017. "Per-Capita Income and the Demand for Skills," CEPR Discussion Papers 12077, C.E.P.R. Discussion Papers.
    3. Messinis, George & Ahmed, Abdullahi D., 2013. "Cognitive skills, innovation and technology diffusion," Economic Modelling, Elsevier, vol. 30(C), pages 565-578.
    4. Akay, Gokhan H. & Yuksel, Mutlu, 2009. "Capital-Skill Complementarity: Evidence from Manufacturing Industries in Ghana," IZA Discussion Papers 4674, Institute for the Study of Labor (IZA).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedawp:2004-11. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elaine Clokey). General contact details of provider: http://edirc.repec.org/data/frbatus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.