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

Author

Listed:
  • Manoj Atolia
  • Yoshinori Kurokawa

Abstract

It can be theoretically shown that imports of new foreign varieties--an increase in the extensive margin of imports--can be a possible channel for increased skill premium in wages. No past studies, however, have quantified how much of the increase in skill premium can be accounted for by the increase in the extensive margin. This paper formulates a static applied 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 extensive margin growth in Mexican manufactured imports from the U.S. can account for up to approximately 15 percent of the actual increase in skill premium in Mexico from 1987 to 1994. It indicates that the increase in import variety reinforced the increase in Mexican skill premium that was caused by the Mexican export side.

Suggested Citation

  • Manoj Atolia & Yoshinori Kurokawa, 2009. "Import Variety and Skill Premium in a Calibrated General Equilibrium Model: The Case of Mexico," Tsukuba Economics Working Papers 2009-006, Faculty of Humanities and Social Sciences, University of Tsukuba.
    • Handle: RePEc:tsu:tewpjp:2009-006
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    Citations

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    Cited by:

    1. Andrea Waddle, 2021. "Trade, Technological Change, And Wage Inequality: The Case Of Mexico," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 243-276, February.
    2. Kiyota Kozo & Kurokawa Yoshinori, 2024. "Intermediate Goods–Skill Complementarity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 24(1), pages 149-186, January.
    3. Yang, Han, 2024. "Dynamic trade, education and intergenerational inequality," Journal of International Economics, Elsevier, vol. 151(C).
    4. 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.
    5. Chingunjav Amarsanaa & Yoshinori Kurokawa, 2021. "The Extensive Margin of International Trade in a Transition Economy: The Case of Mongolia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(4), pages 648-673, December.
    6. Edwards, T. Huw & Lücke, Matthias, 2021. "Decomposing the growth of the high-skilled wage premium in an advanced economy open to trade," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 766-784.
    7. 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.
    8. Brock, Gregory & German-Soto, Vicente, 2017. "Regional industrial informality and efficiency in Mexico, 1990–2013," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 928-941.

    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

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