UCL Department of Economics


IFS-STICERD Online Seminar presented by Steve Machin (LSE)

09 November 2020, 1:30 pm–2:30 pm


Paper Title: Trade and Worker Deskilling (joint with Rui Costa and Swati Dhingra)

Event Information

Open to

UCL staff | UCL students




Institute of Fiscal Studies


Basement Seminar Room
7 Ridgmount Street


This paper presents new evidence on international trade and worker outcomes. It examines a big world event that produced an unprecedentedly large shock to the UK exchange rate when in June 2016 the UK electorate unexpectedly voted to leave the European Union. The value of sterling plummeted and it recorded the biggest one day depreciation that has occurred in any of the world’s four major currencies since the collapse of Bretton Woods. There was considerable variation in the sterling depreciation against different currencies so that industries with different pre-referendum patterns of industry trade were differentially affected. The paper studies the impact of the sterling depreciation on trade and worker outcomes. The price of intermediate imports rose by more in industries facing a bigger depreciation of the exchange rate. This increased cost pressures for businesses, but was not offset by revenue increases from exports. In terms of worker outcomes, wages and training fell for workers employed in more affected industries, largely in the service sector, which were those experiencing the bigger cost shock from more expensive intermediate imports. Calibrating the estimated wage elasticity with respect to intermediate import prices to theory uncovers evidence of a production complementarity between workers and intermediate imports. This provides new direct evidence that, in the modern world of global value chains, it is changes in the cost of intermediate imports that act as a driver of the impact of globalization on workers. The episode studied and these findings add to widely expressed, growing concerns about poor productivity performance relating to skills and to patterns of real wage stagnation that are plaguing contemporary labour markets.

Joining details for the seminar are as follows:



About the Speaker

Steve Machin

at LSE

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