more wage variability than the unskilled workers. In his paper, the skilled workers accept a greater variation in their hourly wage in exchange for a stable job, which induces a pro-cyclical wage premium.<sup>7</sup> Furthermore, some studies have failed to find a contemporaneous relationship between the skill premium and the business cycle, although they argue that a lagged relationship exists. For example, Keane and Prasad (1993) found that the skill premium is uncorrelated with contemporaneous measurements of the business cycle. A similar result was found by Khalifa (2009).<sup>8</sup> He also found that the skill premium is uncorrelated with contemporaneous output, but in this case, there is a lagged, procyclical relationship between the skill premium and output. To explain this observation, Khalifa (2009) developed a model that includes both skilled and unskilled workers as well as two types of vacancies, complex and simple. Complex vacancies can only be filled by skilled workers, while simple vacancies can be filled by either skilled or unskilled workers. It is assumed that complex vacancies are more costly to create than simple ones, thus a technological shock that increases both types of jobs only increases the complex vacancies with a lag. This lagged variation in the labor input of educated workers (in the complex jobs) causes the skill premium to vary pro-cyclically with a lag.

Lindquist (2004) confirmed that the skill premium (in the United States) is uncorrelated with contemporaneous measures of the business cycle, and that the skill premium lags the business cycle.<sup>9</sup> In this study, the above observation is explained by the presence of complementarities between capital and skills. Specifically, increases in the capital-skill ratio increase the relative demand for skilled labor, and hence, increase relative wages.

Thus, the relationship between RTS and the business cycle appears to be ambiguous in developed countries. These mixed results are also found in the scant literature that covers Latin American countries. For instance, Psacharopoulos _et al._ (1996) studied the behavior of RTS in Mexico and found that returns to investment in education fell during recessions and rose during expansions.<sup>10</sup> In contrast, Fasih _et al._ (2010) found that RTS were countercyclical in Mexico and República Bolivariana de Venezuela. For the case of Argentina, earnings of educated workers were less affected in the crises than the earnings of less educated workers during 1992-2002.

The above literature review presents mixed results on the relationship between RTS and the business cycle. Additionally, in general it does not differentiate between types of shocks that might be driven the economy. In particular, the relationship between these returns and foreign demand has not been explored, although there are studies on the relationship between income volatility and trade liberalization.

> 7 Hashimoto (1981) developed a model in this line, in which skilled workers accept higher cyclical variations in wages in return for lower variation in the employment.

> 8 Khalifa (2009) used the Outgoing Rotation Group of the U.S. Census Bureau’s Current Population Survey over the period 1979-2004.

> 9 Lindquist (2004) used the Monthly Outgoing Rotation Group of the U.S. Census Bureau’s Current Population Survey.

> 10 Using the _Encuesta Nacional de Ingresos y Gastos de los Hogares_ from 1984, 1989 and 1992.

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