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Trade and the skill premium in developing countries: the role of intermediate goods and some evidence from Peru

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  • Joy Mazumdar
  • Myriam Quispe-Agnoli

Abstract

The rise in income inequality in developing countries after trade liberalization has been a puzzle for trade theory, which predicts the opposite effect. The authors present a model with imported intermediate goods in which the relative wages of skilled labor can rise due to higher imports of inputs or due to skill-biased technological change. The evidence from Peru in the post-liberalization phase in the early 1990s supports the skilled-biased technological change hypothesis. The authors find that most of the decrease in the blue-collar wage share in the manufacturing industries can be explained by the increase in machinery imports that followed liberalization, suggesting that the skilled-biased technology is embodied in imported machinery.

Suggested Citation

  • Joy Mazumdar & Myriam Quispe-Agnoli, 2002. "Trade and the skill premium in developing countries: the role of intermediate goods and some evidence from Peru," FRB Atlanta Working Paper 2002-11, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2002-11
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    References listed on IDEAS

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    Cited by:

    1. Antonio Avalos & Andreas Savvides, 2006. "The Manufacturing Wage Inequality in Latin America and East Asia: Openness, Technology Transfer, and Labor Supply," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 553-576, November.
    2. Kaveri Deb & William R. Hauk, 2020. "The Impact of Chinese Imports on Indian Wage Inequality," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 63(2), pages 267-290, June.
    3. Monia Ghazali, 2010. "Trade Openness, Relative Demand of Skilled Workers and Technological Change in Tunisia, 1998–2002," Working Papers 554, Economic Research Forum, revised 10 Jan 2010.
    4. Anderson, Edward, 2005. "Openness and inequality in developing countries: A review of theory and recent evidence," World Development, Elsevier, vol. 33(7), pages 1045-1063, July.
    5. repec:dau:papers:123456789/12528 is not listed on IDEAS
    6. Robert McNabb & Rusmawati Said, 2013. "Trade Openness and Wage Inequality: Evidence for Malaysia," Journal of Development Studies, Taylor & Francis Journals, vol. 49(8), pages 1118-1132, August.
    7. Yoshimichi Murakami, 2018. "Globalization and Income Inequality in Latin America: A Review of Theoretical Developments and Recent Evidence," Discussion Paper Series DP2018-16, Research Institute for Economics & Business Administration, Kobe University, revised Aug 2018.

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