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How does skill distribution shape comparative advantage across industries? Theory and evidence

Published online by Cambridge University Press:  03 February 2025

Zhongda Li ,
Jieyi Liu  and
Lu Liu
Zhongda Li
Affiliation:
Department of Economics, Jinan University, Guangzhou, Guangdong, China
Jieyi Liu
Affiliation:
Institute for Economic and Social Research, Jinan University, Guangzhou, Guangdong, China
Lu Liu*
Affiliation:
School of Economics, Shanghai University of Finance and Economics, Shanghai, China
*
Corresponding author: Lu Liu; Email: luliu.econ@gmail.com
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Abstract

This paper revisits the role of skill distribution in shaping regional comparative advantage. Theoretically, we show that it is the relative skill dispersion between exporters and importers, rather than the absolute skill dispersion of exporters, that matters for the pattern of international trade. Using industry-level data on Chinese provincial export flows, we demonstrate that regions with a more dispersed skill distribution relative to their trading partners export more goods produced by sectors with lower skill complementarity. Exploring the potential mechanisms, we further find that the trade-promoting effect from relative skill dispersion probably operates through improving product quality and diversity.

Keywords

relative skill dispersionskill substitutabilitycomparative advantageproduct quality and diversityF11F14J82

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Type
Articles
Information
Macroeconomic Dynamics , Volume 29 , 2025 , e68
Copyright
© The Author(s), 2025. Published by Cambridge University Press

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