Atolia, Manoj and Yoshinori, Kurokawa (2008): Variety Trade and Skill Premium in a Calibrated General Equilibrium Model: The Case of Mexico.
Download (232Kb) | Preview
It can be theoretically shown that variety trade can be a possible source of increased skill premium in wages. No past studies, however, have empirically quantified how much of the increase in skill premium can be accounted for by the increase in variety trade. This paper now formulates a static general equilibrium model and then calibrates it to the Mexican input-output matrix for 1987. In the calibrated model, our numerical experiments show that the increase in U.S.-Mexican variety trade can explain approximately 12 percent of the actual increase in skill premium in Mexico from 1987 to 2000.
|Item Type:||MPRA Paper|
|Original Title:||Variety Trade and Skill Premium in a Calibrated General Equilibrium Model: The Case of Mexico|
|Keywords:||Variety Trade, Skill Premium, Variety-Skill Complementarity, Calibrated General Equilibrium Model, Mexico|
|Subjects:||F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
|Depositing User:||Yoshinori Kurokawa|
|Date Deposited:||10. Mar 2009 06:06|
|Last Modified:||19. Feb 2013 12:22|
Acemoglu, Daron. "Patterns of Skill Premia." Review of Economic Studies, 2003, 70(2), pp. 199-230.
Alonso, Esther V. and David W. Roland-Holst. "A Detailed Social Accouting Matrix for Chile." Mimeo, Mills College, 1995.
Atolia, Manoj. "Trade Liberalization and Rising Wage Inequality in Latin America: Reconciliation with HOS Theory." Journal of International Economics, 2007, 71(2), pp. 467-494.
Bergoeing, Raphael and Timothy J. Kehoe. "Trade Theory and Trade Facts." Federal Reserve Bank of Minneapolis Research Department Staff Report No. 284, 2003.
Berman, Eli; Bound, John and Zvi Griliches. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures." Quarterly Journal of Economics, 1994, 109(2), pp. 367-397.
Berman, Eli; Bound, John and Stephen Machin. "Implications of Skill-Biased Technological Change: International Evidence." Quarterly Journal of Economics, 1998, 113(4), pp. 1245-1279.
Berndt, Ernst R. and Laurits R. Christensen. "Testing for Existence of an Aggregate Index of Labor Inputs." American Economic Review, 1974, 64(3), pp. 391--404.
Blanchard, Olivier and Michael Kremer. "Disorganization." Quarterly Journal of Economics, 1997, 112(4), pp. 1091-1126.
Borjas, George J. and Valerie A. Ramey. "Time Series Evidence on the Sources of Trends in Wage Inequality." American Economic Review (Papers and Proceedings), 1994, 84(2), pp. 10-16.
Brown, Randall S. and Laurits R. Christensen. "Estimating Elasticities of Substitution in a Model of Partial Static Equilibrium: An Application to U.S. Agriculture, 1947--74," in Ernst Berndt and Barry Field, eds., Modeling and Measuring Natural Resource Substitution. Cambridge, MA: MIT Press, 1981.
Bussolo, Maurizio; Mizala, Alejandra and Pilar Romaguera. "Beyond Heckscher--Ohlin: Trade and Labour Market Interactions in a Case Study for Chile." Journal of Policy Modeling, 2002, 24(7-8), pp. 639--666.
Deardorff, Alan V. and Dalia S. Hakura. "Trade and Wages -- What Are the Questions?" in Jagdish Bhagwati and Marvin H. Kosters, eds., Trade and Wages: Leveling Wages Down? Washington, D.C.: AEI Press, 1994, pp. 76-107.
Dinopoulos, Elias and Paul Segerstrom. "A Schumpeterian Model of Protection and Relative Wages." American Economic Review, 1999, 89(3), pp. 450-473.
Dinopoulos, Elias; Syropoulos, Costas and Bin Xu. "Intra-Industry Trade and Wage-Income Inequality." Mimeo, University of Florida, 2002.
Dixit, Avinash and Victor Norman. Theory of International Trade. Cambridge, England: Cambridge University Press, 1980.
Dixit, Avinash and Joseph E. Stiglitz. "Monopolistic Competition and Optimum Product Diversity." American Economic Review, 1977, 67(3), pp. 297-308.
Ethier, Wilfred J. "National and International Returns to Scale in the Modern Theory of International Trade." American Economic Review, 1982, 72(3), pp. 389-405.
Fallon, Peter R. and P.R.G. Layard. "Capital-Skill Complementarity, Income Distribution, and Output Accounting." Journal of Political Economy, 1975, 83(2), pp. 279--301.
Feenstra, Robert C. and Gordon H. Hanson. "Foreign Investment, Outsourcing and Relative Wages," in Robert C. Feenstra, Gene M. Grossman and Douglas A. Irwin, eds., The Political Economy of Trade Policy: Papers in Honor of Jagdish Bhagwati. Cambridge, MA: MIT Press, 1996, pp. 89-127.
Feenstra, Robert C. and Gordon H. Hanson. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," in Kwan Choi and James Harrigan, eds., Handbook of International Trade. Oxford: Basil Blackwell, 2003, pp. 146-187.
Freeman, Richard B. and Lawrence F. Katz. "Rising Wage Inequality: The United States vs. Other Advanced Countries," in Richard B. Freeman, ed., Working Under Different Rules. New York: Russell Sage Foundation, 1994, pp. 29-36.
Goldin, Claudia and Lawrence F. Katz. "The Origins of Technology-Skill Complementarity." Quarterly Journal of Economics, 1998, 113(3), pp. 693-732.
Griliches, Zvi. "Capital-Skill Complementarity." Review of Economics and Statistics, 1969, 51(4), pp. 465--468.
Grubel, Herbert G. and Peter J. Lloyd. Intra-Industry Trade: The Theory and Measurement of International Trade in Differentiated Products. New York: John Wiley and Sons, 1975.
Hanson, Gordon H. and Ann Harrison. "Trade Liberalization and Wage Inequality in Mexico." Industrial and Labor Relations Review, 1999, 52(2), pp. 271-288.
Harrigan, James and Rita A. Balaban. "U.S. Wages in General Equilibrium: The Effects of Prices, Technology, and Factor Supplies, 1963-1991." NBER Working Paper No. 6981, 1999.
Katz, Lawrence F. and David H. Autor. "Change in the Wage Structure and Earnings Inequality," in Orley Ashtenfelter and David Card, eds., Handbook of Labor Economics, Vol. 3A. Amsterdam: North-Holland, 1999, pp. 1463-1555.
Katz, Lawrence F. and Kevin M. Murphy. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors." Quarterly Journal of Economics, 1992, 107(1), pp 35-78.
Kremer, Michael. "The O-Ring Theory of Economic Development." Quarterly Journal of Economics, 1993, 108(3), pp. 551-575.
Krugman, Paul R. "Increasing Returns, Monopolistic Competition, and International Trade." Journal of International Economics, 1979, 9(4), pp. 469-479.
Krugman, Paul R. "Growing World Trade: Causes and Consequences." Brooking Paper on Economic Activity, 1995, 1995 (1), pp. 327-362.
Krugman, Paul R. "Trade and Wages, Reconsidered." Mimeo, Princeton University, 2008.
Krusell, Per; Ohanian, Lee E.; Rios-Rull, Jose-Victor and Giovanni L. Violante. "Capital-Skill Comlementarity and Inequality: A Macroeconomic Analysis." Econometrica, 2000, 68(5), pp. 129-154.
Kurokawa, Yoshinori. "Variety-Skill Complementarity: A Simple Resolution of the Trade-Wage Inequality Anomaly." Mimeo, SUNY at Buffalo, 2008.
Lindquist, Matthew J. "Capital-Skill Complementarity and Inequality in Sweden." Scandinavian Journal of Economics, 2005, 107(4), pp. 711-735.
Martins, Joaquim O.; Scarpetta, Stefano and Dirk Pilat. "Mark-Up Ratios in Manufacturing Industries: Estimates for 14 OECD Countries." OECD Economics Department Working Paper No. 162, 1996.
Revenga, Ana. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing." Journal of Labor Economics, 1997, 15(3), pp. 20-43.
Robbins, Donald J. "Trade, Trade Liberalization and Inequality in Latin America and East Asia: Synthesis of Seven Country Studies." Mimeo, Harvard Institute for International Development, 1996.
Robertson, Raymond. "Relative Prices and Wage Inequality: Evidence from Mexico." Journal of International Economics, 2004, 64(2), pp. 387-409.
Verhoogen, Eric. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector." Quarterly Journal of Economics, 2008, 123(2), pp. 489-530.
Xu, Bin. "Trade Liberalization, Wage Inequality, and Endogenously Determined Nontraded Goods." Journal of International Economics, 2003, 60(2), pp. 417-431.
Zhu, Susan C. and Daniel Trefler. "Trade and Inequality in Developing Countries: A General Equilibrium Analysis." Journal of International Economics, 2005, 65(1), pp. 21-48.