Working Paper: NBER ID: w15097
Authors: Matilde Bombardini; Giovanni Gallipoli; Germán Pupato
Abstract: Is skill dispersion a source of comparative advantage? While it is established that a country's aggregate endowment of human capital is an important determinant of comparative advantage, this paper investigates whether the distribution of skills in the labor force can play a role in the determination of trade flows. We develop a multi-country, multi-sector model of trade in which comparative advantage derives from (i) differences across sectors in the complementarity of workers' skills, (ii) the dispersion of skills in the working population. First, we show how higher dispersion in human capital can trigger specialization in sectors characterized by higher substitutability among workers' skills. We then use industry-level bilateral trade data to show that human capital dispersion, as measured by a standard international metric, has a significant effect on trade flows. We find that the effect is of a magnitude comparable to that of aggregate endowments. The result is robust to the introduction of several controls for other proximate causes of comparative advantage.
Keywords: skill dispersion; trade flows; comparative advantage
JEL Codes: F12; F16; J82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher skill dispersion (D29) | specialization in sectors with higher substitutability among workers' skills (J24) |
| higher skill dispersion (D29) | export more in sectors with higher wage dispersion (F16) |
| skill dispersion (D39) | significant determinant of comparative advantage (F11) |
| skill dispersion (D39) | trade flows (F10) |