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The impact of trade liberalization on skill upgrading. Evidence from Argentina

  • Paula Bustos

In this paper I study the effects of a regional free trade agreement on the demand for skill. I start by documenting a series of facts to shed light on the determinants of a steep increase in the relative demand of skilled labor in a panel of Argentinean industrial firms covering the trade liberalization period. First, this is not explained by labor reallocation across industries or firms but by skill upgrading within firms. Second, exporters upgrade skill faster than non exporters. Third, firms upgrading skill also upgrade technology. These findings are consistent with a model where a reduction in trading partner’s tariffs induces the most productive firms (exporters) to adopt skill-intensive production technologies. Indeed, I find that the reduction in Brazil’s tariffs induces the most productive Argentinean firms to upgrade skill, while the least productive ones downgrade. One third of the increase in the relative demand for skill can be attributed to the reduction in Brazil’s tariffs.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1189.

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Date of creation: Nov 2005
Date of revision: Jul 2011
Handle: RePEc:upf:upfgen:1189
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