Intraindustry trade and the skill premium: Theory and evidence
We explore theoretically and empirically the relationship between intraindustry trade and the skill premium. Our model features a Chamberlinian-type mechanism of income distribution based on quasi-homothetic consumer preferences, non-homothetic production, and factor-biased scale economies at the firm level. The analysis focuses on a two-country, one-sector model of intraindustry trade with two factor inputs consisting of high-skilled and low-skilled labor. We find that a move from autarky to free trade (a) raises the output of the representative firm and its level of total factor productivity, and (b) reduces (raises) the relative wage of high-skilled workers under the hypothesis of output-skill substitutability (output-skill complementarity). Plant-level evidence from Mexico supports the empirical relevance of the proposed income-distribution mechanism.
Year of publication: |
2011
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Authors: | Dinopoulos, Elias ; Syropoulos, Constantinos ; Xu, Bin ; Yotov, Yoto V. |
Published in: |
Journal of International Economics. - Elsevier, ISSN 0022-1996. - Vol. 84.2011, 1, p. 15-25
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Publisher: |
Elsevier |
Keywords: | Monopolistic competition Non-homotheticity Output elasticity of substitution |
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