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Relative Wages and Trade-Induced Changes in Technology

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  • Ekholm, Karolina
  • Ulltveit-Moe, Karen-Helene

Abstract

We develop a model where trade liberalization leads to skill-biased technological change, which in turn raises the relative return to skilled labour. As firms get access to a larger market, they have incentives to choose a more skill-intensive technology because a lowering of variable costs requires additional use of skilled labour. This way, we establish a link between trade, technology and relative returns to skilled and unskilled labour. Moreover, we show that as market integration continues and trade costs fall below a certain threshold, the relative return to skilled labour may fall.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2677.

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Date of creation: Jan 2001
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Handle: RePEc:cpr:ceprdp:2677

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Keywords: Imperfect Competition; Technology; Trade; Trade Liberalization; Wages;

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References

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  1. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
  2. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  3. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
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  8. Paul Krugman & Robert Lawrence, 1993. "Trade, Jobs, and Wages," NBER Working Papers 4478, National Bureau of Economic Research, Inc.
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  10. Burda, Michael C & Dluhosch, Barbara, 1998. "Globalization and European Labour Markets," CEPR Discussion Papers 1992, C.E.P.R. Discussion Papers.
  11. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 533-54, December.
  12. Dinopoulos, Elias & Segerstrom, Paul, 1996. "A Schumpeterian Model of Protection and Relative Wages," Working Paper Series 471, Research Institute of Industrial Economics.
  13. Falvey, Rod & Reed, Geoff, 2000. "Trade Liberalization and Technology Choice," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 409-19, August.
  14. Paul, Catherine J Morrison & Siegel, Donald S, 2001. " The Impacts of Technology, Trade and Outsourcing on Employment and Labor Composition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(2), pages 241-64, June.
  15. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  16. Markusen, James R & Venables, Anthony J, 1997. "The Role of Multinational Firms in the Wage-Gap Debate," Review of International Economics, Wiley Blackwell, vol. 5(4), pages 435-51, November.
  17. Wood, Adrian, 1998. "Globalisation and the Rise in Labour Market Inequalities," Economic Journal, Royal Economic Society, vol. 108(450), pages 1463-82, September.
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