Abstract
Since the late 1970s, both developed and developing countries have experienced skill upgrading; that is, a rise in skilled labor's share of employment and payroll. In this paper, I examine the extent to which skill upgrading can be explained by product cycles, that is, by U.S. innovation and the subsequent relocation of production to U.S. trading partners. The following conclusions obtain. ( i) Product-cycle trade is strongly and positively correlated with skill upgrading in a large panel of industries and countries. (ii) No such correlation is apparent for conventional trade measures that do not differentiate between product-cycle goods and non-product-cycle goods. (iii) Product-cycle trade is at least as important as other previously identified domestic sources of skill upgrading such as capital deepening.
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