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  3. American Economic Review
  4. May 2015
  5. Trade Liberalization and the Skill Premium: A Local Labor Markets Approach

Trade Liberalization and the Skill Premium: A Local Labor Markets Approach

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Abstract

We develop a specific-factors model of regional economies that includes two types of workers, skilled and unskilled. The model delivers a simple equation relating trade-induced local shocks to changes in local skill premia. We apply the methodology to Brazil's early 1990s trade liberalization and find statistically significant but modest effects of liberalization on the evolution of the skill premium between 1991 and 2010. The methodology uses widely available household survey data and can easily be applied to other countries and liberalization episodes.

Citation

Dix-Carneiro, Rafael, and Brian K. Kovak. 2015. "Trade Liberalization and the Skill Premium: A Local Labor Markets Approach." American Economic Review, 105 (5): 551-57. DOI: 10.1257/aer.p20151052

Additional Materials

JEL Classification

  • F13 Trade Policy; International Trade Organizations
  • F16 Trade and Labor Market Interactions
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
  • O19 International Linkages to Development; Role of International Organizations
  • R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics