The Skill Bias of World Trade

Paolo Epifani () and Gino Gancia

No 129, KITeS Working Papers from KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy

Abstract: We argue that, with an elasticity of substitution in consumption greater than one and higher scale economies in the skill-intensive sectors, the entire volume of world trade matters for wage inequality. This implies that trade integration, even among identical countries, is likely to increase the skill premium. This result can also explain the increase in skill premia in developing countries that have experienced drastic trade liberalizations. Further, we argue that evidence of a falling relative price of skill-intensive goods can be reconciled with the fast growth of world trade and that the intersectoral mobility of capital exacerbates the effect of trade on inequality. We provide new empirical evidence in support of our results and a quantitative assessment of the skill bias of world trade.

Keywords: Skill Premium; Scale Effect; Intra-Industry and Inter-Industry Trade (search for similar items in EconPapers)
JEL-codes: F12 F16 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2002-03, Revised 2001-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The Skill Bias of World Trade (2015)
Journal Article: The Skill Bias of World Trade (2008)
Journal Article: The Skill Bias of World Trade (2008)
Working Paper: The skill bias of world trade (2007)
Working Paper: The Skill Bias of World Trade (2002)
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