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Skill Upgrading and the Real Exchange Rate

  • Roberto Alvarez


    (Central Bank of Chile)

  • Ricardo Lopez


    (Indiana University Bloomington)

This paper examines the effect of changes in the real exchange rate on skill upgrading in the case of Chile. Using plant-level data from the manufacturing sector we find that a real depreciation increases the share of skilled workers in the total wage bill in exporters but not in non-exporters. This result suggests that depreciations or, more generally, increases in export profitability, may induce exporters to adopt more skilled-intensive technologies. This finding gives support to recent models of trade that highlight the possible effect of the real exchange rate on skill upgrading and wage inequality. This paper also finds that real depreciations increase the probability of exporting and the export intensity of plants that export, suggesting that these two channels may explain why changes in the real exchange rate may affect wages.

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Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2008-020.

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Length: 29 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:inu:caeprp:2008-020
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  24. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 489-530.
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