KCG Lunch-time Seminar

Skill-Biased Imports, Human Capital Accumulation, and the Allocation of Talent — Lei Li

26 Jun 2020

12:00

13:00

Speaker

Prof. Lei Li, Ph.D. (University of Mannheim)

Abstract

This paper proposes that imported capital goods, which embody skill-complementary technologies, can lead to an increase in the supply of skill in developing countries like China. By exploiting the cross-prefecture variation in capital goods imports, I show that the surge in capital goods imports encourages human capital accumulation and migration in China. To tackle causality, I instrument the capital goods import growth of a prefecture in a certain province with the capital goods import growth in other provinces. There are three main findings. Firstly, the regional difference in capital goods imports can explain 27 percent of the regional difference in college share between 2000 and 2010. A prefecture with a $100 increase in capital goods imports per capita had a 1.4 percentage points increase in college share. Secondly, this paper quantifies the importance of the three channels, namely skill acquisition of local stayers, immigration of skilled workers, and emigration of skilled workers, through which capital goods imports increase college share. I find that the first channel is the most important. Thirdly, I trace out the responses of skill supply to the demand shift. I find that capital goods imports increase college wage premium and the effect attenuates over time with the increase in skill supply.