Abstract
We explore theoretically and empirically the relationship between intraindustry trade and the skill premium. Our model features a Chamberlinian-type mechanism of income distribution based on quasi-homothetic consumer preferences, non-homothetic production, and factor-biased scale economies at the firm level. The analysis focuses on a two-country, one-sector model of intraindustry trade with two factor inputs consisting of high-skilled and low-skilled labor. We find that a move from autarky to free trade (a) raises the output of the representative firm and its level of total factor productivity, and (b) reduces (raises) the relative wage of high-skilled workers under the hypothesis of output-skill substitutability (output-skill complementarity). Plant-level evidence from Mexico supports the empirical relevance of the proposed income-distribution mechanism.
Original language | English |
---|---|
Pages (from-to) | 15-25 |
Journal | Journal of International Economics |
Volume | 84 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2011 |
Corresponding author email
elias.dinopoulos@warrington.ufl.eduKeywords
- Monopolistic competition
- Non-homotheticity
- Output elasticity of substitution
- WAGE INEQUALITY; RELATIVE WAGES; INCREASING RETURNS; PRODUCTIVITY; MEXICO; US; COMPETITION; TECHNOLOGY; PROTECTION; PRICES
Indexed by
- ABDC-A*
- Scopus
- SSCI
Fingerprint
Dive into the research topics of 'Intraindustry trade and the skill premium: Theory and evidence'. Together they form a unique fingerprint.Cite this
Dinopoulos, E., Xu, B., Yotov, Y. V., & Syropoulos, C. (2011). Intraindustry trade and the skill premium: Theory and evidence. Journal of International Economics, 84(1), 15-25. https://doi.org/10.1016/j.jinteco.2011.01.003