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

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Listed author(s):
  • Atolia, Manoj
  • Yoshinori, Kurokawa

Abstract

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: https://mpra.ub.uni-muenchen.de/13698/1/MPRA_paper_13698.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13698.

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Date of creation: 29 Oct 2008
Handle: RePEc:pra:mprapa:13698
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Keywords: Variety Trade; Skill Premium; Variety-Skill Complementarity; Calibrated General Equilibrium Model; Mexico;

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Find related papers by JEL classification:
  • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
  • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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Cited by:

  1. Yoshinori Kurokawa, 2011. "Variety-skill complementarity: a simple resolution of the trade-wage inequality anomaly," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(2), pages 297-325, February.
  2. Cho, Sang-Wook (Stanley) & Díaz, Julián P., 2013. "Trade integration and the skill premium: Evidence from a transition economy," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 601-620.

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