Skill classification does matter: estimating the relationship between trade flows and wage inequality

Kristin Forbes

The Journal of International Trade & Economic Development, 2001, vol. 10, issue 2, 175-209

Abstract: Empirical work must pay careful attention to how it measures the relative skill abundance of countries and the relative skill intensity embodied in trade flows. This paper compiles a new data set, using income levels, average education, manufacturing wages, and an index of these three variables, to classify countries and trade flows as relatively high skill or low skill. Then, in order to show the importance of skill classification, it uses a reduced-form fixed-effects model to estimate the relationship between trade flows and wage inequality. This specification not only controls for any time-invariant omitted variables, but also permits the inclusion of a large number of diverse countries. When more accurate skill rankings are utilized, results suggest that, in high-skill abundant countries, increased trade with lower-skill countries is correlated with an increase in wage inequality. This relationship is significant and highly robust and is driven by the negative relationship between trade and low-skill wages (instead of a positive relationship between trade and high-skill wages.) Results, however, are highly dependent on the skill classification utilized.

Keywords: Trade; Wages; Inequality; Skill (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09638190110039046 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jitecd:v:10:y:2001:i:2:p:175-209

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RJTE20

DOI: 10.1080/09638190110039046

Access Statistics for this article

The Journal of International Trade & Economic Development is currently edited by Pasquale Sgro, David E.A. Giles and Charles van Marrewijk

More articles in The Journal of International Trade & Economic Development from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().