TRADE‐INDUCED SKILL POLARIZATION

Grace Gu, Samreen Malik, Dario Pozzoli and Vera Rocha

Economic Inquiry, 2020, vol. 58, issue 1, 241-259

Abstract: We study how wage gaps across skills and the skill distribution in an economy respond to trade integration. Using administrative data of Denmark (1995–2011), we find that trade has a negative effect on the wage gap between secondary and primary education and a positive effect on the wage gap between tertiary and secondary education. We also show that trade affects skill distribution and induces skill polarization: trade has a positive effect on both the mean and standard deviation of skills. Wage‐gap changes induced by trade shocks explain about 21%–30% of the effect of trade on skills.

Date: 2020
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https://doi.org/10.1111/ecin.12834

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Working Paper: Trade-Induced Skill Polarization (2018)
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