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Skill Upgrading and the Real Exchange Rate

29 Pages Posted: 15 Jul 2008  

Roberto Alvarez

University of Chile - Department of Economics

Ricardo A. López

Brandeis International Business School

Date Written: July 14, 2008

Abstract

This paper examines the effect of changes in the real exchange rate on skill upgrading in the case of Chile. Using plant-level data from the manufacturing sector we find that a real depreciation increases the share of skilled workers in the total wage bill in exporters but not in non-exporters. This result suggests that depreciations or, more generally, increases in export profitability, may induce exporters to adopt more skilled-intensive technologies. This finding gives support to recent models of trade that highlight the possible effect of the real exchange rate on skill upgrading and wage inequality. This paper also finds that real depreciations increase the probability of exporting and the export intensity of plants that export, suggesting that these two channels may explain why changes in the real exchange rate may affect wages.

JEL Classification: F14, F16, O30, O54

Suggested Citation

Alvarez, Roberto and López, Ricardo A., Skill Upgrading and the Real Exchange Rate (July 14, 2008). CAEPR Working Paper No. 2008-020. Available at SSRN: https://ssrn.com/abstract=1159896 or http://dx.doi.org/10.2139/ssrn.1159896

Roberto Alvarez

University of Chile - Department of Economics ( email )

Diagonal Paraguay 257
Torre 26, Of. 1801
Santiago
Chile

Ricardo A. Lopez (Contact Author)

Brandeis International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

HOME PAGE: http://people.brandeis.edu/~rlopez/

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