Paper #833

Title:

The skill bias of world trade

Authors:

Paolo Epifani and Gino Gancia

Date:

November 2004 (Revised: March 2007)

Abstract:

Under plausible assumptions about preferences and technology, the model in this paper suggests that the entire volume of world trade matters for wage inequality. Therefore, trade integration, even among identical countries, is likely to increase the skill premium. Further, we argue that empirical 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 E.ect, Intra-Industry and Inter-Industry Trade

JEL codes:

F12, F16

Area of Research:

Macroeconomics and International Economics

Published in:

The Economic Journal, 118, 927-960, July 2008

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