Trade Liberalization, Technology and Skill Upgrading. Evidence from Argentina

Instead, I present and test a model where bilateral trade liberalization induces the most productive firms (exporters) to adopt skill-biased new technologies. I test the model in the context of a regional free trade agreement, MERCOSUR. I find that the increase in the relative demand of skilled labor does not come from labor reallocation across sectors or firms but from skill upgrading within firms. Firms that upgrade technology faster also upgrade skill faster. Consistent with the model, I find that in response to reductions in tariffs Brazil’s tariffs the the most productive Argentinean firms upgrade skill, while the least productive ones downgrade