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The effect of trade on the demand for skill - evidence from the interstate highway system

Michaels, Guy (2007) The effect of trade on the demand for skill - evidence from the interstate highway system. Centre for Economic Policy Research, London, UK.

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Abstract

Since changes in trade openness are typically confounded with other factors, it has been difficult to identify the labor market consequences of increased international trade. The advent of the United States Interstate Highway System provides a unique policy experiment, which I use to identify the effect of reducing trade barriers on the relative demand for skilled labor. The Interstate Highway System was designed to connect major metropolitan areas, to serve national defense and to connect the United States to Canada and Mexico. As a consequence–though not an objective–many rural counties were also connected to the highway system. I find that these counties experienced an increase in trade-related activities, such as trucking and retail sales, by 7-10 percentage points per capita. Most significantly, by increasing trade the highways raised the relative demand for skilled manufacturing workers in counties with a high endowment of human capital and reduced it elsewhere, consistent with the predictions of the Heckscher-Ohlin model.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.cepr.org/
Additional Information: © 2007 Guy Michaels
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment
F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 30 Jan 2008
URL: http://eprints.lse.ac.uk/3268/

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