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Trade, wage inequalities and disparities between countries: the technology connection

Duranton, Gilles (1999) Trade, wage inequalities and disparities between countries: the technology connection. Growth and Change, 30 (4). pp. 455-478. ISSN 0017-4815

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Abstract

This paper takes seriously the idea that international trade has played an important role in explaining both some convergence between developed economies as well as rising inequalities at the personal level. Previous studies used traditional trade theory as a reference framework. The empirical consensus is now that differences in factor endowment explain at best a small fraction of rising wage inequalities. This argument, by contrast, builds on labor specialization and increasing returns. Deeper economic integration allows trade in differentiated intermediate goods and primary tasks, thus transforming local increasing returns into global increasing returns. This pushes towards geographical equalization. At the same time, deeper integration also increases the size of the pool of available skilled workers. This may lead them to a 'technological secession' as it makes more skill-demanding technologies more profitable. Technological secession in turn fosters wage inequalities at the personal level.

Item Type: Article
Official URL: http://www.wiley.com/bw/journal.asp?ref=0017-4815
Additional Information: © 1999 Gatton College of Business and Economics, University of Kentucky
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Geography and Environment
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 17 Feb 2010 15:56
URL: http://eprints.lse.ac.uk/7270/

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