Negative skill sorting across production chains

Asuyama Yoko and Goto Hideaki

No 557, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: Previous literature generally predicts that individuals with higher skills work in industries with longer production chains. However, the opposite skill-sorting pattern, a "negative skill-sorting" phenomenon, is also observed in reality. This paper proposes a possible mechanism by which both cases can happen and shows that negative skill sorting is more likely to occur when the quality of intermediate inputs degrade rapidly (or improves slowly) along the production chain. We empirically confirm our theoretical prediction by using country-industry panel data. The results are robust regardless of estimation method, control variables, and industry coverage. This study has important implications for understanding countries' comparative advantages and development patterns.

Keywords: Labor market; Human resources; Manufacturing industries; Skill sorting; Input quality; Production chains (search for similar items in EconPapers)
JEL-codes: J24 L23 (search for similar items in EconPapers)
Date: 2016-03-01
New Economics Papers: this item is included in nep-tid
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 557. 2016-03-01

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