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Machines and machinists: Capital-Skill Complementarity from an International Trade Perspective

  • Miklos Koren

    ()

    (Institute of Economics - Hungarian Academy of Sciences, Department of Economics of Central European University)

  • Marton Csillag

    ()

    (TIER - University of Maastricht)

We estimate the effect of imported machines on the wages of machine operators utilizing Hungarian linked employer-employee data. We infer exposure to imported machines from detailed trade statistics of the firm and the occupation description of the worker. We find that workers exposed to imported machines earn about 8 percent higher wages than other machine operators at the same firm. When we proxy for unobserved worker characteristics, we find a significant 3 percent wage premium, suggesting that the relationship is causal. The return to schooling is also higher on imported machines. We build a simple matching model consistent with these findings. Our findings suggest that machine imports can be an important channel through which skill-biased technical change reaches less developed and emerging economies.

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Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1114.

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Length: 33 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:has:discpr:1114
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  1. Paula Bustos, 2005. "The impact of trade liberalization on skill upgrading. Evidence from Argentina," Economics Working Papers 1189, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2011.
  2. Laszlo Halpern & Miklos Koren & Adam Szeidl, 2005. "Import and Productivity," IEHAS Discussion Papers 0509, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Arnaud Costinot & Jonathan Vogel, 2009. "Matching and Inequality in the World Economy," NBER Working Papers 14672, National Bureau of Economic Research, Inc.
  4. Francesco Caselli & Daniel Wilson, 2003. "Importing Technology," NBER Working Papers 9928, National Bureau of Economic Research, Inc.
  5. J. DavidBrown & JohnS. Earle & �lmos Telegdy, 2010. "Employment and Wage Effects of Privatisation: Evidence from Hungary, Romania, Russia and Ukraine," Economic Journal, Royal Economic Society, vol. 120(545), pages 683-708, 06.
  6. Entorf, Horst & Gollac, Michel & Kramarz, Francis, 1999. "New Technologies, Wages, and Worker Selection," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 464-91, July.
  7. Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
  8. Boyan Jovanovic, 1998. "Vintage Capital and Inequality," NBER Working Papers 6416, National Bureau of Economic Research, Inc.
  9. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  10. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers 95-21, Columbia - Graduate School of Business.
  11. Elhanan Helpman & David T. Coe, 1993. "International RandD Spillovers," IMF Working Papers 93/84, International Monetary Fund.
  12. Paula Bustos, 2010. "Trade Liberalization, Technology and Skill Upgrading. Evidence from Argentina," 2010 Meeting Papers 937, Society for Economic Dynamics.
  13. Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Producer Dynamics: New Evidence from Micro Data," NBER Books, National Bureau of Economic Research, Inc, number dunn05-1, December.
  14. László Halpern & Miklós Koren & Adam Szeidl, 2011. "Imported Inputs and Productivity," CeFiG Working Papers 8, Center for Firms in the Global Economy, revised 16 Sep 2011.
  15. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April.
  16. Alfaro, Laura & Hammel, Eliza, 2007. "Capital flows and capital goods," Journal of International Economics, Elsevier, vol. 72(1), pages 128-150, May.
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