NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers and Publications by Justin Caron

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June 2017Per Capita Income and the Demand for Skills
with Thibault Fally, James Markusen: w23482
Almost all of the literature about the growth of income inequality and the relationship between skilled and unskilled wages approaches the issue from the production side of general equilibrium (skill-biased technical change, international trade). Here, we add a role for income-dependent demand interacted with factor intensities in production. We explore how income growth and trade liberalization influence the demand for skilled labor when preferences are non-homothetic and income-elastic goods are more intensive in skilled labor, an empirical regularity documented in Caron, Fally and Markusen (2014). In one experiment, counterfactual simulations show that sector neutral productivity growth, which generates shifts in consumption towards skill-intensive goods, leads to significant increases ...
June 2012Skill Premium and Trade Puzzles: a Solution Linking Production and Preferences
with Thibault Fally, James R. Markusen: w18131
International trade theory is a general-equilibrium discipline, yet most of the standard portfolio of research focuses on the production side of general equilibrium. In addition, we do not have a good understanding of the relationship between characteristics of goods in production and characteristics of preferences. This paper conducts an empirical investigation into the relationship between a good's factor intensity in production and its income elasticity of demand in consumption. In particular, we find a strong and significant positive relationship between skilled-labor intensity in production and income elasticity of demand for several types of preferences, with and without accounting for trade costs and differences in prices. Counter-factual simulations yield a number of results. We ca...

Published: "International Trade Puzzles: A Solution Linking Production and Preferences" With Justin Caron and James R. Markusen, Quarterly Journal of Economics, August 2014, Vol. 129 (3).

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