Resumen:
This paper uses variation in Chilean regions’ exposure to a large exogenous copper price shock to examine the effects of the growth of a geographically concentrated natural resources-intensive export sector on local wages and employment between 2003 and 2011. I develop a specific factors model of local labor markets with two types of workers (skilled and unskilled) that are mobile across sectors within a region but imperfectly mobile across regions. The model predicts that a price shock in an industry that intensively employs unskilled labor will reduce local skill premia proportionally more in regions where that industry represents a higher share of total employment compared to other regions. Empirical results show that a region exposed to a 10% increase in average prices (or to an exogenous increase in yearly exports of 10,000 dollars per worker) experienced a 2.4% increase in average unskilled workers’ wages relatively to other regions, and that such gains contributed to a reduction in regional skill premia. I also find substantial employment reallocation from unaffected sectors to the sector that benefited from the price increase within regions, but much less evidence of mobility across regions. Finally, there is evidence of a decline in poverty rates and income inequality in regions most exposed to the price shock compared to other regions.
