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, t...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/872841520954666920/International-competition-returns-to-skill-and-labor-market-adjustment http://hdl.handle.net/10986/29459 |
| Summary: | 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. |
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