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Skill Dispersion and Trade Flows

Author

Listed:
  • Matilde Bombardini

    (University of British Columbia, CIFAR, NBER and RCEA)

  • Giovanni Gallipoli

    (University of British Columbia and RCEA)

  • Germán Pupato

    (University of British Columbia)

Abstract

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.

Suggested Citation

  • Matilde Bombardini & Giovanni Gallipoli & Germán Pupato, 2009. "Skill Dispersion and Trade Flows," Working Paper series 20_09, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:20_09
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition

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