Download INTERNATIONAL COMPETITION, RETURNS TO SKILL AND LABOUR MARKET ADJUSTMENT February 19, 2009

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6. Conclusions
This paper confirms international competition as a source of increased returns to skill. Using
a large panel (1986-2000) of matched employer-employee data for the Portuguese
manufacturing sector, two different skill definitions, and two different identification
strategies of exogenous changes in international competition, we show that returns to skill
within an industry increase with competition. Furthermore, we identify increasing
international competition as a significant determinant of skill upgrading. This result is valid
both when workers stay in the same industry and when they move. It indicates that skill
acquisition is an important part of the adjustment process to a policy change or shock
(exogenous to the wage setting conditions within the country) that changes relative wages,
and suggests that policy attention to the consequences of increased competition for human
capital accumulation seems merited.
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