Trade Openness and the Demand for Skills: Evidence from Turkish Microdata

31 Pages Posted: 22 Dec 2008

See all articles by Elena F. Meschi

Elena F. Meschi

University of Warwick - Centre for the Study of Globalisation and Regionalisation (CSGR); Polytechnic University of Marche

Erol Taymaz

Middle East Technical University - Department of Economics

Marco Vivarelli

Universita Cattolica del Sacro Cuore, Milano; IZA Institute of Labor Economics

Abstract

In this paper we report evidence on the relationship between trade openness, technology adoption and relative demand for skilled labour in the Turkish manufacturing sector, using firm-level data over the period 1980-2001. In a dynamic panel data setting using a unique database of 17,462 firms, we estimate an augmented cost share equation whereby the wage bill share of skilled workers in a given firm is related to international exposure and technology adoption. Overall, results suggest that trade openness and technology play a key role in shifting the demand for labour towards more skilled workers within each firm. Technology-related variables (domestic R&D expenditures and technological transfer from abroad) are positive and significantly related to skill upgrading, as are the involvement of foreign capital in a firm's ownership and the propensity to export. Moreover, firms belonging to those sectors that most raised their imported inputs also experienced a higher increase in the labour cost share of skilled workers. This finding is consistent with the idea that imports by a middle-income country imply a transfer of new technologies that are more skill-intensive than those previously in use in domestic markets. This idea is reinforced by the finding that only imported inputs from industrialised countries - where the potential for innovation diffusion comes from - enter the estimated regression significantly.

Keywords: globalisation, skills, skill-biased technological change, technology transfer, GMM-SYS

JEL Classification: F16, O15, O33

Suggested Citation

Meschi, Elena F. and Taymaz, Erol and Vivarelli, Marco, Trade Openness and the Demand for Skills: Evidence from Turkish Microdata. IZA Discussion Paper No. 3887, Available at SSRN: https://ssrn.com/abstract=1318846

Elena F. Meschi (Contact Author)

University of Warwick - Centre for the Study of Globalisation and Regionalisation (CSGR) ( email )

Coventry CV4 7AL
United Kingdom

Polytechnic University of Marche

Piazzale Martelli 8
Ancona, 18039
Italy

Erol Taymaz

Middle East Technical University - Department of Economics ( email )

Ankara, 06531
Turkey
+90312210 3034 (Phone)

HOME PAGE: http://www.metu.edu.tr/~etaymaz

Marco Vivarelli

Universita Cattolica del Sacro Cuore, Milano ( email )

Largo Gemelli 1
Milano, 20123
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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