Exports and Skills: The Impact of Destination in a Middle Income Country

Abstract

In this work we analyse the links between exports and its destination to high income countries and the demand for skilled labour. The theoretical literature argues that exporting to high-income countries leads to quality upgrading that is skill intensive, and which requires additional skill intensive services. We test this theory using a panel of Uruguayan manufacturing firms for the period 1997-2006 using data from the Encuesta de Actividad Economica from the Instituto Nacional de Estadisticas, which was merged with export data from the Direccion Nacional de Aduanas. Firstly, we analyse associations by means of OLS estimations. Then we use IV-GMM models to analyse causality. Our preliminary results seem to indicate that contrary to previous studies for developed and other middle income economies such as Mexico (Verhoogen 2008) and Argentina (Brambilla et al. 2012), exports to high income countries do not translate into a higher demand for skills for the Uruguayan case, while exports in general do. The explanation for these results may lie in the productive specialization of the country, characterised by sectors of low scope for vertical differentiation, or as Hausmann et al. (2005) argue “what we export matters”.