Trade and the skill premium in developing countries: the role of intermediate goods and some evidence from Peru

Joy Mazumdar and Myriam Quispe-Agnoli ()

No 2002-11, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: The rise in income inequality in developing countries after trade liberalization has been a puzzle for trade theory, which predicts the opposite effect. The authors present a model with imported intermediate goods in which the relative wages of skilled labor can rise due to higher imports of inputs or due to skill-biased technological change. The evidence from Peru in the post-liberalization phase in the early 1990s supports the skilled-biased technological change hypothesis. The authors find that most of the decrease in the blue-collar wage share in the manufacturing industries can be explained by the increase in machinery imports that followed liberalization, suggesting that the skilled-biased technology is embodied in imported machinery.

Keywords: Peru; Economic development; Latin America; Trade (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (8)

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