Working Paper: NBER ID: w23503
Authors: Javier Cravino; Sebastian Sotelo
Abstract: We study how international trade affects manufacturing employment and the relative wage of unskilled workers when goods and services are traded with different intensities. Manufacturing trade reduces manufacturing prices worldwide, which reduces manufacturing employment if manufactures and services are complements. We document that manufacturing production is unskilled-labor intensive, so that these changes increase the skill-premium. We incorporate this mechanism in a quantitative trade model and show that trade has had a negative impact on manufacturing employment and the relative wage of unskilled workers. The impact on the skill premium was larger in developing countries where manufacturing is particularly unskilled-labor intensive.
Keywords: International Trade; Manufacturing Employment; Skill Premium; Unskilled Workers
JEL Codes: F16; F62; F63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| international trade (F19) | manufacturing prices (L60) |
| manufacturing prices (L60) | manufacturing employment (L60) |
| international trade (F19) | manufacturing employment (L60) |
| international trade (F19) | skill premium (J24) |
| manufacturing employment (L60) | skill premium (J24) |