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Trade-Induced Structural Change and the Skill Premium

Javier Cravino () and Sebastian Sotelo

No 658, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: We study how international trade affects manufacturing employment and the relative wage of unskilled workers when goods and services are traded with different intensities. Manufacturing trade reduces manufacturing prices worldwide, which reduces manufacturing employment if manufactures and services are complements. We document that manufacturing production is unskilled-labor intensive, so that these changes increase the skill-premium. We incorporate this mechanism in a quantitative trade model and show that trade has had a negative impact on manufacturing employment and the relative wage of unskilled workers. The impact on the skill premium was larger in developing countries where manufacturing is particularly unskilled-labor intensive.

Keywords: Trade; Skill Premium; Manufacturing Employment; Structural Change; Gains From Trade (search for similar items in EconPapers)
JEL-codes: F16 F62 F63 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2017-05
New Economics Papers: this item is included in nep-int and nep-tid
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Downloads: (external link)
http://www.fordschool.umich.edu/rsie/workingpapers/Papers651-675/r658.pdf

Related works:
Journal Article: Trade-Induced Structural Change and the Skill Premium (2019) Downloads
Working Paper: Trade Induced Structural Change and the Skill Premium (2017) Downloads
Working Paper: Trade-Induced Structural Change and the Skill Premium (2016)
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