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Skill Dispersion and Trade Flows

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  • 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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    Cited by:

    1. Cheng, Wenya & Morrow, John & Tacharoen, Kitjawat, 2012. "Productivity as if space mattered: an application to factor markets across China," LSE Research Online Documents on Economics 48930, London School of Economics and Political Science, LSE Library.
    2. Cai, Jie & Stoyanov, Andrey, 2016. "Population aging and comparative advantage," Journal of International Economics, Elsevier, vol. 102(C), pages 1-21.
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    4. Gene Grossman, 2013. "Heterogeneous workers and international trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(2), pages 211-245, June.
    5. Gene M. Grossman & Elhanan Helpman & Philipp Kircher, 2013. "Matching and Sorting in a Global Economy," NBER Working Papers 19513, National Bureau of Economic Research, Inc.
    6. Hélène Latzer & Florian Mayneris, 2011. "Trade in quality and income distribution: an analysis of the enlarged EU market," Working Papers of BETA 2011-21, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    7. Papps, Kerry L. & Bryson, Alex & Gomez, Rafael, 2011. "Heterogeneous worker ability and team-based production: Evidence from major league baseball, 1920-2009," Labour Economics, Elsevier, vol. 18(3), pages 310-319, June.
    8. Gu, Grace Weishi & Malik, Samreen & Pozzoli, Dario & Rocha, Vera, 2016. "Trade Induced Skill Upgrading: Lessons from the Danish and Portuguese Experiences," IZA Discussion Papers 10035, Institute for the Study of Labor (IZA).
    9. Bombardini, Matilde & Gallipoli, Giovanni & Pupato, Germán, 2014. "Unobservable skill dispersion and comparative advantage," Journal of International Economics, Elsevier, vol. 92(2), pages 317-329.
    10. Xiaoping Chen, 2016. "Skill Distributions, Effective Endowment and Trade," Economic Growth Centre Working Paper Series 1603, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
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    14. Jonathan I. Dingel, 2017. "The Determinants of Quality Specialization," Review of Economic Studies, Oxford University Press, vol. 84(4), pages 1551-1582.
    15. Brant Abbott & Giovanni Gallipoli, 2017. "Human Capital Spillovers and the Geography of Intergenerational Mobility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 208-233, April.
    16. Crinò, Rosario & Ogliari, Laura, 2017. "Financial imperfections, product quality, and international trade," Journal of International Economics, Elsevier, vol. 104(C), pages 63-84.
    17. Nunn, Nathan & Trefler, Daniel, 2014. "Domestic Institutions as a Source of Comparative Advantage," Handbook of International Economics, Elsevier.
    18. Antonio Ciccone & Elias Papaioannou, 2016. "Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics," NBER Working Papers 22368, National Bureau of Economic Research, Inc.
    19. Fernando Broner & Paula Bustos & Vasco M. Carvalho, 2012. "Sources of Comparative Advantage in Polluting Industries," NBER Working Papers 18337, National Bureau of Economic Research, Inc.
    20. Matilde Bombardini & Giovanni Gallipoli & German Pupato, 2012. "Skill Dispersion and Trade Flows," American Economic Review, American Economic Association, vol. 102(5), pages 2327-2348, August.
    21. Sly, Nicholas, 2010. "Skill Acquisition, Incentive Contracts and Jobs: Labor Market Adjustment to Trade," MPRA Paper 25004, University Library of Munich, Germany.
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    23. Asuyama, Yoko, 2012. "Skill Distribution and Comparative Advantage: A Comparison of China and India," World Development, Elsevier, vol. 40(5), pages 956-969.
    24. Brant Abbott & Giovanni Gallipoli, 2014. "Technology and Intergenerational Persistence: Theory and Some Evidence," 2014 Meeting Papers 860, Society for Economic Dynamics.
    25. GORYUNOV, Maxim, 2017. "Sorting when firms have size," Economics Working Papers MWP 2017/09, European University Institute.

    More about this item

    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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