International Competition, Returns to Skill, and Labor Market Adjustment
Does increased import competition lead to higher returns to skill within an industry and, therefore, to greater incentives for skill acquisition? Does it also induce skill upgrading by the industry’s existing workforce? To answer these questions, this paper follows individual workers across skills/occupations, firms, and industries using a longitudinal matched employer-employee data set covering all workers and firms in Portugal over 1986-2000. To identify the effects of international competition the analysis uses two exogenous measures of changes in international competition at the industry level. The first is a quasi-natural experiment based on the strong appreciation of the Portuguese currency during 1989-1992 and preexisting differences in trade exposure across industries in a differences-in-differences estimation. The second is source-weighted real exchange rates defined at the industry level. Based on both empirical strategies, and two definitions of skill, the paper shows that international competition increases returns to skill and induces skill/occupation upgrading within industries.
| Main Authors: | , , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018-03
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| Subjects: | INTERNATIONAL TRADE, LABOR MARKET ADJUSTMENT, SKILLED LABOR, LABOR SKILLS, RETURNS TO EDUCATION, TRAINING, LABOR MARKET, TRADE ADJUSTMENT, COMPETITIVENESS, TRADE LIBERALIZATION, TRADE EXPOSURE, REAL EXCHANGE RATE, |
| Online Access: | http://documents.worldbank.org/curated/en/872841520954666920/International-competition-returns-to-skill-and-labor-market-adjustment https://hdl.handle.net/10986/29459 |
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