Changes in the relative wages of workers with different amounts of education have profound implications for developing countries, where initial levels of inequality are often very high. In this paper we use micro data for five Latin American countries over the 1980s and 1990s to document trends in men's returns to education, and to estimate whether the changes in skill premia we observe can be explained by supply or demand factors. We propose a model of demand for skills with three production inputs, and we allow the elasticity of substitution between the different educational inputs to be different using a nested CES function. Using this model, we show that the dramatic expansion in secondary school in many countries in Latin America depressed the wages of workers with secondary school. We also show that there have been sharp increases in the demand for more skilled workers in the region.

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Sanchez-Paramo and Schady describe the evolution of different countries, which is consistent with skill-biased relative wages in five Latin American countries-technological change. Argentina, Brazil, Chile, Colombia, and Mexico. They o Trade appears to be an important transmission use repeated cross-sections of household surveys, and mechanism. Increases in the demand for the most skilled decompose the evolution of relative wages into factors workers took place at a time when countries in Latin associated with changes in relative supply and relative America considerably increased the penetration of demand. The authors have three main conclusions: imports, including imports of capital goods.o Increases in the relative wages of the most skilled The authors show that changes in the volume and (university-educated) workers took place concurrently research and development intensity of imports are with increases in their relative abundance in all of the significantly related to changes in the demand for more countries except Brazil. This is strong evidence of skilled workers in Latin America. Their research increases in the demand for skilled workers.complements earlier work on the effects of technology o Increases in the wage bill of skilled workers occurred transmitted through trade on productivity and on the largely within sectors, and in the same sectors in demand for skilled labor.This paper-a product of Public Services, Development Research Group-is part of a larger effort in the group to understand the impact of globalization on human capital outcomes. Copies of the paper are available free from the World Bank,