THE EFFECTS OF TRADE WITH DEVELOPING COUNTRIES ON THE REGIONAL DEMAND FOR SKILL IN THE U.S.: EVIDENCE FROM COUNTY DATA*

ABSTRACT Using county‐level data from the 1980s and 1990s and a county‐level trade measure that incorporates the county's industrial mix and patterns of international trade across industries, I provide new evidence that trade with developing countries raises the demand for skill and the skill premium in the U.S. Consistent with Heckscher–Ohlin, I find that trade driven by differences in factor endowments has an economically significant impact on local labor markets. The evidence suggests that when trade with developing countries rises, counties with higher skill endowment and greater employment in industries with larger trade shares experience greater relative demand for high‐skilled labor.