Trade-Induced Skill Polarization

Grace Gu, Samreen Malik, Dario Pozzoli and Vera Rocha

No 6-2018, Working Papers from Copenhagen Business School, Department of Economics

Abstract: We study how the skill distribution in an economy responds to changes in wage gaps induced by trade integration. Using administrative data for Denmark (1993-2012), we conduct a two-step empirical analysis. In the first step, we predict changes in wage gaps that are triggered by exogenous trade shocks. In the second step, we estimate the impact of such changes on the skill distribution. The main results for Denmark show that both the average and the standard deviation of skills increase as a result of trade integration. We then extend our analysis to Portugal, using its administrative data (1993-2012), to shed light on the potential role the labor market and education policy may play in establishing the feedback effect of trade on the skill distribution. Finally, we provide a theoretical intuition to rationalize both sets of results.

Keywords: skill polarization; skill upgrading; trade integration and labor market frictions (search for similar items in EconPapers)
JEL-codes: F16 J24 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2018-07-09
New Economics Papers: this item is included in nep-eur and nep-lma
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Journal Article: TRADE‐INDUCED SKILL POLARIZATION (2020)
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