Trade, technology adoption and wage inequalities: theory and evidence

Bas, Maria (2008) Trade, technology adoption and wage inequalities: theory and evidence. CEP Discussion Paper (902). London School of Economics and Political Science. Centre for Economic Performance, London, UK. ISBN 9780853283355

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Abstract

This paper develops a model of trade that features heterogeneous firms, technology choice and different types of skilled labor in a general equilibrium framework. Its main contribution is to explain the impact of trade integration on technology adoption and wage inequalities. It also provides empirical evidence to support the model’s predictions using plant-level panel data from Chile’s manufacturing sector (1990-1999). The theoretical framework offers a possible explanation of the puzzling increase in skill premium in the developing countries. The key mechanism is found in the effects of trade policy on the number of new firms upgrading technology and on the skill-intensity of labor. Trade liberalization pushes up export revenues, raising the probability that the most productive exporters will upgrade their technology. These firms then increase their relative demand for skilled labor, thereby raising inequalities.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk/
Additional Information:	© 2008 The author
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HD Industries. Land use. Labor
JEL classification:	F - International Economics > F1 - Trade > F10 - General F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
Date Deposited:	06 Jul 2010 15:48
Last Modified:	15 Sep 2023 23:13
URI:	http://eprints.lse.ac.uk/id/eprint/28513

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