Skills Scarcity and Export Intensity

Abstract

We describe a model of trade with input based product differentiation and non-proportional trade costs that is capable of predicting a positive correlation between firms’ export intensity, the price of their exports, and the wages they pay to their workers. These correlations arise in the model solely from comparative input scarcity and independently of any productivity differentials: in equilibrium, firms that employ workers with comparatively scarcer skills, other things equal, export a larger proportion of their output, pay higher wages and charge higher prices.