Skill Upgrading and Imports in Us Manufacturing

Many researchers have asserted that trade plays a minor role in rising skill-intensity in the U.S., primarily because the majority of skill-upgrading occurred within industries. However, recent theoretical models show that international trade can induce within-industry skill-upgrading by raising Ramp;D intensity and creating skill-biased technologies. This paper tests this assertion by estimating the effect of rising import shares on wage shares for 4-digit SIC US manufacturing industries. Using instrumental variables estimation to account for the endogeneity of imports, I find that roughly half of the total skill-upgrading in US manufacturing between 1972 and 1988 can be explained by rising import shares