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Negative Skill Sorting across Production Chains

Author

Listed:
  • Yoko Asuyama

    (Institute of Developing Economies, Japan External Trade Organization)

  • Hideaki Goto

    (International University of Japan)

Abstract

Previous literature generally predicts that individuals with higher skills work in industries with longer production chains. However, the opposite skill-sorting pattern, a "negative skill-sorting" phenomenon, is also observed in reality. This paper proposes a possible mechanism by which both cases can happen and shows that negative skill sorting is more likely to occur when the quality of intermediate inputs degrade rapidly (or improves slowly) along the production chain. We empirically confirm our theoretical prediction by using country-industry panel data. The results are robust regardless of estimation method, control variables, and industry coverage. This study has important implications for understanding countries' comparative advantages and development patterns.

Suggested Citation

  • Yoko Asuyama & Hideaki Goto, 2016. "Negative Skill Sorting across Production Chains," Working Papers EMS_2016_04, Research Institute, International University of Japan.
    • Handle: RePEc:iuj:wpaper:ems_2016_04
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    File URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2016_04.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Skill sorting; Input quality; Production chains;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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