International Trade, Technology, and the Skill Premium

Ariel Burstein and Jonathan Vogel

Journal of Political Economy, 2017, vol. 125, issue 5, 1356 - 1412

Abstract: What are the consequences of international trade on the skill premium? We incorporate skill-intensity differences across firms and sectors into a standard model of international trade. Reductions in trade costs reallocate factors toward a country's comparative advantage sectors, increasing the skill premium in countries with a comparative advantage in skill-intensive sectors and decreasing it elsewhere. Reductions in trade costs also reallocate factors toward more productive and skill-intensive firms within sectors and toward skill-intensive sectors in all countries, increasing the skill premium in all countries. Quantitatively, we find that trade liberalization increases the skill premium in almost all countries.

Date: 2017
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Working Paper: International trade, technology, and the skill premium (2012)
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