Trade-induced Skill Polarization

Grace W  Gu; Samreen Malik; Dario  Pozzoli; Vera Rocha

doi:10.1111/ecin.12834

Trade-induced Skill Polarization

Grace W Gu, Samreen Malik, Dario Pozzoli, Vera Rocha

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Abstract

We study how wage gaps across skills and the skill distribution in an economy respond to trade integration. Using administrative data of Denmark (1995–2011), we find that trade has a negative effect on the wage gap between secondary and primary education and a positive effect on the wage gap between tertiary and secondary education. We also show that trade affects skill distribution and induces skill polarization: trade has a positive effect on both the mean and standard deviation of skills. Wage‐gap changes induced by trade shocks explain about 21%–30% of the effect of trade on skills.

Original language	English
Journal	Economic Inquiry
Volume	58
Issue number	1
Pages (from-to)	241-259
Number of pages	19
ISSN	0095-2583
DOIs	https://doi.org/10.1111/ecin.12834
Publication status	Published - Jan 2020

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Published online: 02 September 2019

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abstract = "We study how wage gaps across skills and the skill distribution in an economy respond to trade integration. Using administrative data of Denmark (1995–2011), we find that trade has a negative effect on the wage gap between secondary and primary education and a positive effect on the wage gap between tertiary and secondary education. We also show that trade affects skill distribution and induces skill polarization: trade has a positive effect on both the mean and standard deviation of skills. Wage‐gap changes induced by trade shocks explain about 21%–30% of the effect of trade on skills.",

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N2 - We study how wage gaps across skills and the skill distribution in an economy respond to trade integration. Using administrative data of Denmark (1995–2011), we find that trade has a negative effect on the wage gap between secondary and primary education and a positive effect on the wage gap between tertiary and secondary education. We also show that trade affects skill distribution and induces skill polarization: trade has a positive effect on both the mean and standard deviation of skills. Wage‐gap changes induced by trade shocks explain about 21%–30% of the effect of trade on skills.

AB - We study how wage gaps across skills and the skill distribution in an economy respond to trade integration. Using administrative data of Denmark (1995–2011), we find that trade has a negative effect on the wage gap between secondary and primary education and a positive effect on the wage gap between tertiary and secondary education. We also show that trade affects skill distribution and induces skill polarization: trade has a positive effect on both the mean and standard deviation of skills. Wage‐gap changes induced by trade shocks explain about 21%–30% of the effect of trade on skills.

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