The factors behind the increase in the relative wages of skilled workers in developing countries are still not well understood. The authors use data from Peru to analyze the determinants of within-industry share of skilled workers. They use a translog cost function for gross output and are...

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...