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The impact of trade liberalization on skill upgrading. Evidence from Argentina
Bustos, Paula
Universitat Pompeu Fabra. Departament d'Economia i Empresa
In this paper I study the effects of a regional free trade agreement on the demand for skill.I start by documenting a series of facts to shed light on the determinants of a steep increasein the relative demand of skilled labor in a panel of Argentinean industrial firms covering thetrade liberalization period. First, this is not explained by labor reallocation across industriesor firms but by skill upgrading within firms. Second, exporters upgrade skill faster than nonexporters. Third, firms upgrading skill also upgrade technology. These findings are consistentwith a model where a reduction in trading partner s tariffs induces the most productive firms(exporters) to adopt skill-intensive production technologies. Indeed, I find that the reduction inBrazil s tariffs induces the most productive Argentinean firms to upgrade skill, while the leastproductive ones downgrade. One third of the increase in the relative demand for skill can beattributed to the reduction in Brazil s tariffs.
Macroeconomics and International Economics
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