Directed Sector and Skill-Specific Technological Change: The Development of Wages for the High and Low Skilled
AbstractThis paper presents a dynamic two sector, two skill groups model of endogenous skill and sector specific technological change. The sectors refer to a "high-tech” and a "low-tech” sector of an economy. The direction of technological change is driven by market forces determined by the skill composition of the work force. It is shown that a change in this skill composition - a higher growth rate of the high skilled workforce in the "high-tech” sector than in the "low-tech” sector - leads to an increasing relative wage of the high skilled despite the fact that the aggregate supply of the high skilled might rise. This directed technological adjustment can easily overcome the usual substitution effect which would lead the relative wage to fall. The important result of the model is that the result does not depend on high values of the elasticity of substitution as necessary in other models of directed technological change, e.g. Acemoglu (1998, 2001). Further some of these models can be interpreted as special cases of the present model. Some open economy extensions show how effects of the mentioned change in the skill composition of the work force can spill over from one country to another if both countries engage in free trade and if the state of technology is determined globally.
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Bibliographic InfoPaper provided by Universitaet Augsburg, Institute for Economics in its series Discussion Paper Series with number 236.
Date of creation: Feb 2003
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More information through EDIRC
wage inequality; directed technological change; endogenous growth; international trade;
Find related papers by JEL classification:
- E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-24 (All new papers)
- NEP-DEV-2003-02-24 (Development)
- NEP-LAB-2003-02-24 (Labour Economics)
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