Unobservable Skill Dispersion and Comparative Advantage


We study a theoretical mechanism linking comparative advantage to the distribution of skills in the working population.

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Abstract. This paper investigates a theoretical mechanism linking comparative advantage to the distribution of skills in the working population. We develop a tractable multi-country, multi-industry model of trade with unobservable skills in the labor market and show that comparative advantage derives from (i) cross-industry differences in the substitutability of workers’ skills and (ii) cross-country differences in the dispersion of skills. We establish the conditions under which higher skill dispersion leads to specialization in industries characterized by higher skill substitutability across tasks. The main results are robust when the model is extended to allow for partial observability of skills. Finally, we use distributions of literacy scores from the International Adult Literacy Survey to approximate cross-country productivity differences due to skill dispersion and we carry out a quantitative assessment of the impact of skill dispersion on the pattern of trade.

Citation

@article{bombardini2014unobservable,
  title={Unobservable Skill Dispersion and Comparative Advantage},
  author={Bombardini, Matilde and Gallipoli, Giovanni and Pupato, Germ{\'a}n},
  journal={Journal of International Economics},
  volume={92},
  number={2},
  pages={317--329},
  year={2014},
  publisher={North-Holland}
}

Author: gallipol

Giovanni Gallipoli is a professor at UBC in Vancouver. Giovanni's research focuses on the origins and consequences of economic inequality with a focus on how heterogeneity shapes individual behaviors and aggregate economic outcomes. Giovanni has worked on a variety of topics, including the equilibrium effects of policies that promote skill formation; the link between skill heterogeneity and a country's comparative advantage; the influence of families on long-term outcomes such as labor supply and consumption; intergenerational mobility and the linkages between parental heterogeneity and inequality; and how firm-level differences contribute to variation in workers’ skill returns. Giovanni is a recipient of the Killam Research Award, the FEEM Award, and the Young Economist Award of the European Economic Association. He is a CEPR research fellow as well as a former Fulbright Scholar and Weatherhall fellow. He serves as a member of the external board of overseers of the Panel Study of Income Dynamics (PSID) and as an associate editor of the Journal of Political Economy. Giovanni is an alumnus of the Sant'Anna School of Advanced Studies and the University of Pisa in Italy. He received his Ph.D. in Economics from University College London in the UK.