TY - JOUR
T1 - Intraindustry trade and the skill premium: Theory and evidence
AU - Dinopoulos, Elias
AU - Xu, Bin
AU - Yotov, Yoto V.
AU - Syropoulos, Constantinos
PY - 2011
Y1 - 2011
N2 - 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.
AB - 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.
KW - Monopolistic competition
KW - Non-homotheticity
KW - Output elasticity of substitution
KW - WAGE INEQUALITY; RELATIVE WAGES; INCREASING RETURNS; PRODUCTIVITY; MEXICO; US; COMPETITION; TECHNOLOGY; PROTECTION; PRICES
KW - Monopolistic competition
KW - Non-homotheticity
KW - Output elasticity of substitution
KW - WAGE INEQUALITY; RELATIVE WAGES; INCREASING RETURNS; PRODUCTIVITY; MEXICO; US; COMPETITION; TECHNOLOGY; PROTECTION; PRICES
UR - https://www.webofscience.com/api/gateway?GWVersion=2&SrcApp=ceibs_wosapi&SrcAuth=WosAPI&KeyUT=WOS:000291193000002&DestLinkType=FullRecord&DestApp=WOS
U2 - 10.1016/j.jinteco.2011.01.003
DO - 10.1016/j.jinteco.2011.01.003
M3 - Journal
SN - 0022-1996
VL - 84
SP - 15
EP - 25
JO - Journal of International Economics
JF - Journal of International Economics
IS - 1
ER -