Article
The endogenous skill bias of technical change and wage inequality in developing countries
The Journal of International Trade & Economic Development
(2016)
Abstract
This paper draws on existing empirical literature and an original theoretical model to argue that technical change does not have to be skill-biased in developing countries. Instead, the extent to which technology adoption in developing countries favors skilled workers depends on a number of factors. Free trade induces technology that favors skilled workers in skill-abundant developing countries and that favors unskilled workers in skill-scarce developing countries, and therefore amplifies the predicted wage effects of trade liberalization. Developing countries experience technical change that is skill-biased when imported skill-biased technologies become relatively cheaper. Increased skill supply further biases technical change in favor of skilled labor. These features aid our understanding of the observed rises in inequality within developing countries, the absence of a significant downward effect of expanded educational attainment on skill premia, and the differential effects of trade liberalization on inequality.
Keywords
- Income inequality,
- endogenous growth,
- globalization,
- technology transfer,
- Stolper–Samuelson theorem
Disciplines
Publication Date
Summer 2016
Citation Information
Alberto Behar. "The endogenous skill bias of technical change and wage inequality in developing countries" The Journal of International Trade & Economic Development (2016) Available at: http://works.bepress.com/alberto_behar/48/