industries which received more FDI exhibit a greater demand for skilled labor, a fi nding that they interpret as consistent with a model in which production outsourcing from an industrialized to a developing country raises the demand for skilled labor in both countries.<sup>5</sup> Using plant-level data for the 1980s, Harrison and Hanson (1999) fi nd that Mexican exporters and foreign-owned plants tend to employ a higher share of skilled workers, and so do plants that use more imported inputs and machinery. Pavcnik (2003) analyses panel data on Chilean manufacturing plants during the 1980s and fi nds that the use of imported materials, patented technology and foreign technical assistance appear to be unrelated to the demand for skilled labor in fi xed effects and timedifferenced regressions. However, she reports positive effects of those three variables on skilled demand when using the cross-sectional variation in the data, which she interprets as re fl ecting unobserved plant heterogeneity driven, for example, by different degrees of managerial ability which affect both the adoption of foreign technology and the demand for skilled labor.<sup>6</sup> This paper obtains new plant-level evidence from Brazil and China on the effect of international economic activities on the demand for skilled labor. As Harrison and Hanson (1999), we focus on the cross-sectional variation in the demand for skilled workers, and provide separate estimates on the effects of the use of imported inputs, exports and FDI on relative wages and relative employment.<sup>7</sup> In order to account for the unobserved effects of managerial abil-

> 5 In the model proposed by Feenstra and Hanson (1996b), a single fi nal good is produced with a continuum of intermediate inputs, which are traded between two countries, “North” and “South”, with relative abundance of skilled and unskilled labor, respectively. The North specializes in inputs that are relatively intensive in skilled labor while the reverse is true for the South. A fl ow of capital from North to South leads to a shift of production activities to the South. Those activities are relatively intensive in unskilled labor by Northern standards, but they use more skilled labor than other inputs previously produced in the South, so that the relative wage of skilled labor increases in both countries.

> 6 Gorg and Strobl (2001) use panel data on Ghanaian manufacturing plants to estimate the effect of exports and the use of imported machinery on the demand for skilled workers. They fi nd that the latter is unrelated to exports, but positively linked to the use of imported machinery that was purchased for the purpose of technological progress.

> 7 Note that Harrison and Hanson (1999) use a panel dataset of Mexican manufacturing plants but most of their relative wage and relative employment regressions are estimated by OLS in levels. The only exception is a speci fi cation including only trade policy variables (tariffs and import licenses without any other controls) that is also estimated in differences. The justi fi cation for their approach is "the very little time series variation in many of the other independent variables" (p. 146).

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