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Skill Dispersion and Trade Flows

  • Matilde Bombardini
  • Giovanni Gallipoli
  • Germán Pupato

Is skill dispersion a source of comparative advantage? While it is established that a country's aggregate endowment of human capital is an important determinant of comparative advantage, this paper investigates whether the distribution of skills in the labor force can play a role in the determination of trade flows. We develop a multi-country, multi-sector model of trade in which comparative advantage derives from (i) differences across sectors in the complementarity of workers' skills, (ii) the dispersion of skills in the working population. First, we show how higher dispersion in human capital can trigger specialization in sectors characterized by higher substitutability among workers' skills. We then use industry-level bilateral trade data to show that human capital dispersion, as measured by a standard international metric, has a significant effect on trade flows. We find that the effect is of a magnitude comparable to that of aggregate endowments. The result is robust to the introduction of several controls for other proximate causes of comparative advantage.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15097.

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Date of creation: Jun 2009
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Publication status: published as Matilde Bombardini & Giovanni Gallipoli & German Pupato, 2012. "Skill Dispersion and Trade Flows," American Economic Review, American Economic Association, vol. 102(5), pages 2327-48, August.
Handle: RePEc:nbr:nberwo:15097
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