Skill Dispersion and Trade Flows

Is skill dispersion a source of comparative,advantage?,While it is established that a country’s aggregate endowment of human capital is an important determinant of comparative advantage, this paper,investigates whether,the distribution of skills in the labor force can play a role in the determination of trade ‡ows. We develop a multi-country, multi-sector model of trade in which,comparative,advantage,derives from (i) di¤erences across sectors in the complementarity of workers’skills, (ii) the dispersion of skills in the working population. First, we show how higher dispersion in human,capital can trigger specialization in sectors characterized,by higher substitutability among,workers’skills. We then use industry-level bilateral trade data to show that human capital dispersion, as measured by a standard international metric, has a signi…cant e¤ect on trade ‡ows. We …nd that the e¤ect is of a magnitude,comparable,to that of aggregate endowments.,The result is robust to the introduction,of several controls for other proximate causes of comparative,advantage. JEL Classi…cation codes: F12, F16, J82. We would like to thank Paul Beaudry, David Green, Patrick Francois, Thomas Lemieux, Vadim Marmer, Francesco Trebbi, Jonathan Vogel and seminar participants at CIFAR for helpful comments. University of British Columbia, CIFAR, NBER and RCEA.