The Skill Bias of World Trade

IIES Seminar Paper No. 707

33 Pages Posted: 9 May 2002  

Paolo Epifani

Bocconi University - Department of Economics

Gino A. Gancia

Massachusetts Institute of Technology (MIT) - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: March 2002

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

JEL Classification: F12, F161

Suggested Citation

Epifani, Paolo and Gancia, Gino A., The Skill Bias of World Trade (March 2002). IIES Seminar Paper No. 707. Available at SSRN: https://ssrn.com/abstract=309623 or http://dx.doi.org/10.2139/ssrn.309623

Paolo Epifani

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Gino A. Gancia (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

Paper statistics

Downloads
73
Rank
174,078
Abstract Views
628