Import penetration and returns to tasks: recent evidence from the Peruvian labour market

Abstract

This paper provides original evidence on the impact of import penetration on wages of individuals performing manual/cognitive task-intensive jobs in the Peruvian labour market. Matching labour force surveys with task indicators from the us O*Net database and with information on industry- and occupation-specific import exposure, we build a continuous measure of manual intensity to uncover the heterogeneous effect of import penetration on workers’ wages. In order to tackle the endogeneity hampering the consistent estimation of our effects of interest, we combine an identification strategy based on heteroskedasticity with the traditional instrumental variable approach. We find that workers employed in highly cognitive/less manual-intensive jobs in the Peruvian manufacturing sectors are positively affected by industry-specific import penetration. This evidence is confirmed and magnified for the whole economy when the effects of occupation-specific import exposure are addressed.