Trade and the Skill Premium in Developing Countries PDF Download

Author: Joy Mazumdar
Publisher:
ISBN:
Category : Free trade
Languages : en
Pages : 40

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Author: Roberto Bonfatti
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 0

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An interesting puzzle is that trade liberalization in the 1980s and 1990s has been associated with a sharp increase in the skill premium in both developed and developing countries. This is in contrast with neoclassical theory, according to which trade should increase the relative return of the relatively abundant factor. We develop a simple model of trade with capital market imperfections, and show that trade can increase the skill premium in both the North and the South, and both in the short run as well as in the long run. We show that trade with a skill-intensive economy has two effects: it reduces the skilled wage, and thus discourages non talented agents out of the skilled labor force; and it reduces the cost of subsistence, thus allowing the talented offspring of unskilled workers to go to school. This compositional effect has a positive effect on the observed skill premium, possibly strong enough to counterweight the decrease in the skilled wage.

Author: Mr.Alberto Behar
Publisher: International Monetary Fund
ISBN: 147553695X
Category : Business & Economics
Languages : en
Pages : 31

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This paper draws on existing empirical literature and an original theoretical model to argue that globalization and skill supply affect the extent to which technology adoption in developing countries favors skilled workers. Developing countries are experiencing technical change that is skill-biased because skill-biased technologies are becoming relatively cheaper. Increased skill supply further biases technical change in favor of skilled labor. Free trade induces technology that favors skilled workers in skill-abundant developing countries and that favors unskilled workers in skill-scarce developing countries, and therefore amplifies the predicted wage effects of trade liberalization. These features aid our understanding of the observed rises in inequality within developing countries and the absence of a significant downward effect of expanded educational attainment on skill premia. They also help account for the large and differential effects of trade liberalization on inequality. These findings are pertinent for the Middle East and North Africa because of its recent increase in trade openness and remarkable rise in educational attainment.

Author: Javier Cravino
Publisher:
ISBN:
Category : International trade
Languages : en
Pages : 70

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We study how international trade affects manufacturing employment and the relative wage of unskilled workers when goods and services are traded with different intensities. Manufacturing trade reduces manufacturing prices worldwide, which reduces manufacturing employment if manufactures and services are complements. We document that manufacturing production is unskilled-labor intensive, so that these changes increase the skill-premium. We incorporate this mechanism in a quantitative trade model and show that trade has had a negative impact on manufacturing employment and the relative wage of unskilled workers. The impact on the skill premium was larger in developing countries where manufacturing is particularly unskilled-labor intensive.

Author: Lili Yan Ing
Publisher:
ISBN:
Category : Developing countries
Languages : en
Pages : 374

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Author: Justin Caron
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 0

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International trade theory is a general-equilibrium discipline, yet most of the standard portfolio of research focuses on the production side of general equilibrium. In addition, we do not have a good understanding of the relationship between characteristics of goods in production and characteristics of preferences. This paper conducts an empirical investigation into the relationship between a good's factor intensity in production and its income elasticity of demand in consumption. In particular, we find a strong and significant positive relationship between skilled-labor intensity in production and income elasticity of demand for several types of preferences, with and without accounting for trade costs and differences in prices. Counter-factual simulations yield a number of results. We can explain about half of "missing trade", and show an important role for per-capita income in understanding trade/GDP ratios, the choice of trading partners, and the composition of trade. Furthermore, an equal rise in productivity in all sectors in all countries leads to a rising skill premium in all countries, with particularly large increases in developing countries.

Author: Ivan T. Kandilov
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Using county-level data from the 1980s and 1990s and a county-level trade measure that incorporates the county's industrial mix and patterns of international trade across industries, I provide new evidence that trade with developing countries raises the demand for skill and the skill premium in the U.S. Consistent with Heckscher-Ohlin, I find that trade driven by differences in factor endowments has an economically significant impact on local labor markets. The evidence suggests that when trade with developing countries rises, counties with higher skill endowment and greater employment in industries with larger trade shares experience greater relative demand for high-skilled labor.

Author: Lili Yan Ing
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Even though there are gains from international trade, there is still a case that trade opportunities have significant distributional consequences. This study considers the arguments that trade liberalisation and technological catch-up could raise the skill premium. The first argument has shown, in the North-South trade framework, that a reduction in import tariff may raise the skill premium if the tariff reduction causes the range of the traded goods in which export expansion occurs to be greater than the range of the traded goods in which imports expand. The second argument has shown that technological catch-up could raise the skill premium through export expansion. This paper presents an empirical study of developing economies from 1980 to 2005, which confirms that trade liberalisation raises the skill premium, whilst technological catch-up has an insignificant effect on the skill premium.

Author: Marc Bacchetta
Publisher: World Trade Organization
ISBN:
Category : Business & Economics
Languages : en
Pages : 196

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Book Description
In recent decades, the global economy has experienced a profound transformation due to trade integration and technological progress as well as important political changes. This transformation has been accompanied by significant positive effects at the global level, as increased trade integration has helped to raise incomes in advanced and developing economies, lifting millions out of poverty. At the same time, it has translated into changes experienced by individuals, companies and communities. While overall, better job opportunities are on the rise, workers who are forced to leave their existing jobs may find it difficult to share in these improvements. Policies aimed at facilitating adjustment can reduce the number of those left behind by trade or technology, while at the same time raising the net gains from these developments, improving overall efficiency and boosting incomes. Given the role of skills in productivity and in trade performance as well as in access to employment and wage distribution, a strong emphasis on skills development is vital for both firms and workers. This publication argues that in the current fast-changing context of globalization, where technology and trade relations evolve rapidly, the responsiveness of skills supply to demand plays a central role not only from an efficiency perspective, but also from a distributional perspective. Featuring results from the ILO's Skills for Trade and Economic Diversification (STED) programme, this report shows that appropriate skills development policies are key to helping firms participate in trade, and also to helping workers find good jobs.

Author: Hillel Rapoport
Publisher: World Bank Publications
ISBN:
Category : Developing countries
Languages : en
Pages : 39

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"Docquier and Rapoport focus on the consequences of skilled migration for developing countries. They first present new evidence on the magnitude of migration of skilled workers at the international level and then discuss its direct and indirect effects on human capital formation in developing countries in a unified stylized model. Finally they turn to policy implications, with emphasis on migration and education policy in a context of globalized labor markets. This paper-- a product of the Trade Team, Development Research Group-- is part of a larger effort in the group to measure and understand the implication of the brain drain as part of the International Migration and Development Program"-- World Bank web site.