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Trading Up and the Skill Premium

Nir Jaimovich, Sergio Rebelo, Arlene Wong, Miao Ben Zhang


This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book NBER Macroeconomics Annual 2019, volume 34, Martin S. Eichenbaum, Erik Hurst, and Jonathan A. Parker, editors
Conference held April 11-12, 2019
Forthcoming from University of Chicago Press
in NBER Book Series NBER Macroeconomics Annual

We study the impact on the skill premium of increases in the quality of goods consumed by households (“trading up”). Our empirical work shows that high- quality goods are more intensive in skilled labor than low-quality goods and that household spending on high-quality goods rises with income. We propose a model consistent with these facts. This model accounts for the past rise in the skill premium with more plausible rates of skill-biased technical change than those required by the canonical model. It also implies that an expansion of the skilled labor force reduces the skill premium by much less than in the canonical model.

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This chapter first appeared as NBER working paper w25931, Trading Up and the Skill Premium, Nir Jaimovich, Sergio Rebelo, Arlene Wong, Miao Ben Zhang
Commentary on this chapter:
  Comment, Daron Acemoglu
  Comment, Jonathan Vogel
 
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