Trade Openness and the Demand for Skills: Evidence from Turkish Microdata

Elena Meschi (), Erol Taymaz () and Marco Vivarelli ()
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Elena Meschi: Università Politecnica delle Marche, Ancona

No 3887, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: In this paper we report evidence on the relationship between trade openness, technology adoption and relative demand for skilled labour in the Turkish manufacturing sector, using firm-level data over the period 1980-2001. In a dynamic panel data setting using a unique database of 17,462 firms, we estimate an augmented cost share equation whereby the wage bill share of skilled workers in a given firm is related to international exposure and technology adoption. Overall, results suggest that trade openness and technology play a key role in shifting the demand for labour towards more skilled workers within each firm. Technology-related variables (domestic R&D expenditures and technological transfer from abroad) are positive and significantly related to skill upgrading, as are the involvement of foreign capital in a firm's ownership and the propensity to export. Moreover, firms belonging to those sectors that most raised their imported inputs also experienced a higher increase in the labour cost share of skilled workers. This finding is consistent with the idea that imports by a middle-income country imply a transfer of new technologies that are more skill-intensive than those previously in use in domestic markets. This idea is reinforced by the finding that only imported inputs from industrialised countries − where the potential for innovation diffusion comes from - enter the estimated regression significantly.

Keywords: globalisation; skills; skill-biased technological change; technology transfer; GMM-SYS (search for similar items in EconPapers)
JEL-codes: F16 O15 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara, nep-cwa, nep-hrm and nep-lab
Date: Written
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