The Skill Bias of World Trade

UPF Economics and Business Working Paper 833

43 Pages Posted: 29 Nov 2005

See all articles by Paolo Epifani

Paolo Epifani

Bocconi University - Department of Economics

Gino Gancia

Queen Mary University of London; Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2004

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 Classification: F12, F16

Suggested Citation

Epifani, Paolo and Gancia, Gino, The Skill Bias of World Trade (November 2004). UPF Economics and Business Working Paper 833 , Available at SSRN: https://ssrn.com/abstract=859486 or http://dx.doi.org/10.2139/ssrn.859486

Paolo Epifani

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Gino Gancia (Contact Author)

Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

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