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Variety Trade and Skill Premium in a Calibrated General Equilibrium Model: The Case of Mexico

  • Manoj Atolia

    ()

    (Department of Economics, Florida State University)

  • Yoshinori Kurokawa

    ()

    (Department of Economics, SUNY, Buffalo)

It can be theoretically shown that variety trade can be a possible source of increased skill premium in wages. No past studies, however, have empirically quantified how much of the increase in skill premium can be accounted for by the increase in variety trade. This paper now formulates a static general equilibrium model and then calibrates it to the Mexican input-output matrix for 1987. In the calibrated model, our numerical experiments show that the increase in U.S.-Mexican variety trade can explain approximately 12 percent of the actual increase in skill premium in Mexico from 1987 to 2000.

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File URL: ftp://econpapers.fsu.edu/RePEc/fsu/wpaper/wp2008_11_03.pdf
File Function: First version, 2008-10
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Paper provided by Department of Economics, Florida State University in its series Working Papers with number wp2008_11_03.

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Length: 33
Date of creation: Oct 2008
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Handle: RePEc:fsu:wpaper:wp2008_11_03
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