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Two Tales on the Returns to Education: The Impact of Trade on Wages

Tebaldi, Edinaldo and Kim, Jongsung (2008): Two Tales on the Returns to Education: The Impact of Trade on Wages.

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Abstract

This paper uses microdata from the Current Population Survey combined with data from the U.S. International Trade Commission and Bureau of Economic Analysis to evaluate the impacts of international trade (imports penetration and exports intensiveness) on wages with a special focus on the returns to education. Consistent with the literature, our empirical analysis provides evidence that the wage rates of similarly skilled workers differ across net-exporting, net-importing and nontradable industries. Our results add to the literature by showing that the wage gap usually found across importing and exporting industries vanishes for highly-skilled workers (workers with college degree and beyond) when we control for the cross-effect between international trade and education, but the wage gap due to international trade still persists for low-skilled workers. This finding supports the view that education serves as an equalizer and counterbalances the adverse impact from imports-penetration on wages of highly-skilled workers

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