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Skill Upgrading and the Real Exchange Rate

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  • Roberto Álvarez
  • Ricardo A. López

Abstract

This paper examines the effect of changes in the real exchange rate on skill upgrading in the case of Chile. Using plant‐level data from the manufacturing sector, we find that a real depreciation increases the share of skilled workers in the total wage bill in exporters but not in non‐exporters. This result suggests that depreciations or, more generally, increases in export profitability, may induce exporters to adopt more skill‐intensive technologies. This finding gives support to recent models of trade that highlight the possible effect of the real exchange rate on skill upgrading and wage inequality. This paper also finds that real depreciations increase plants’ export intensity, suggesting that skill upgrading for firms that are already exporters is the channel through which real exchange depreciations affect wage inequality.

Suggested Citation

  • Roberto Álvarez & Ricardo A. López, 2009. "Skill Upgrading and the Real Exchange Rate," The World Economy, Wiley Blackwell, vol. 32(8), pages 1165-1179, August.
    • Handle: RePEc:bla:worlde:v:32:y:2009:i:8:p:1165-1179
    DOI: 10.1111/j.1467-9701.2009.01203.x
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    Cited by:

    1. Julian Emami Namini & Giovanni Facchini & Ricardo A. Lopez, 2011. "Export Growth and Factor Market Competition: Theory and Evidence," Development Working Papers 309, Centro Studi Luca d'Agliano, University of Milano, revised 09 May 2011.
    2. Murphy, Gavin & Siedschlag, Iulia, 2012. "The Effect of Real Exchange Rate Changes on Labour Productivity Growth," Papers WP439, Economic and Social Research Institute (ESRI).
    3. Roberto Alvarez & Ricardo A. López, 2015. "Foreign Technology Acquisition and Changes in the Real Exchange Rate," The World Economy, Wiley Blackwell, vol. 38(4), pages 613-628, April.
    4. Araújo, Bruno César & Paz, Lourenço S., 2014. "The effects of exporting on wages: An evaluation using the 1999 Brazilian exchange rate devaluation," Journal of Development Economics, Elsevier, vol. 111(C), pages 1-16.
    5. Ricardo Lopez & Kathleen McQueeney, 2017. "Does Foreign Trade Facilitation Improve Firms’ Export Performance? A Microeconomic Analysis of Chilean Manufacturing Plants," Working Papers 112, Brandeis University, Department of Economics and International Business School.
    6. Doan, Thi Hong Thinh & Gente, Karine, 2014. "Real exchange rate and productivity in a specific-factor model with skilled and unskilled labour," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 1-15.
    7. Chin‐Yoong Wong & Yoke‐Kee Eng, 2022. "Renminbi Appreciation and China's Industrial Upgrading," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(3), pages 1-22, May.
    8. Zhang, Teng & Ouyang, Puman, 2018. "Is RMB appreciation a nightmare for the Chinese firms? An analysis on firm profitability and exchange rate," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 27-43.
    9. Julian Emami Namini & Giovanni Facchini & Ricardo A. Lopez, 2011. "Export Growth and Factor Market Competition: Theory and Some Evidence," Tinbergen Institute Discussion Papers 11-013/2, Tinbergen Institute.

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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