Advanced Search
MyIDEAS: Login to save this paper or follow this series

Trade liberalisation, skill-biased technical change and wages in developing countries: a model with heterogeneous firms

Contents:

Author Info

  • Mauro Caselli

Abstract

This paper analyses the effects of trade liberalisation and technical change on real and relative wages. It builds a model with monopolistic competition, heterogeneous firms and two countries, North and South, and solves it numerically. Skill-biased technical change, caused by decreases in the price of imported equipment as a result of reduced trade costs or falls in its world price, tends to increase the relative wages of skilled workers. This increase in the skill premium can occur even in skill-scarce developing countries, as has often been observed in reality, even though Stolper-Samuelson effects pull the other way. What drives the rise in skilled wages when imported equipment becomes cheaper is the rise in demand for skilled workers in the most productive firms in each sector. Whether or not real unskilled wages increase absolutely after trade liberalisation appears to depend on whether trade costs are ad valorem or per-unit.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/2010-27text.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2010-27.

as in new window
Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:csa:wpaper:2010-27

Contact details of provider:
Postal: Manor Road, Oxford, OX1 3UQ
Phone: +44-(0)1865 271084
Fax: +44-(0)1865 281447
Email:
Web page: http://www.csae.ox.ac.uk/
More information through EDIRC

Related research

Keywords: trade liberalisation; skill-biased technical change; wage inequality; real wages; equipment-skill complementarity.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Christian Broda & David E. Weinstein, 2004. "Globalization and the Gains from Variety," NBER Working Papers 10314, National Bureau of Economic Research, Inc.
  2. Paolo Epifani & Gino Gancia, 2004. "The skill bias of world trade," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 833, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2007.
  3. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Oxford University Press, Oxford University Press, vol. 74(1), pages 31-66.
  4. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
  5. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  6. Gonzague Vannoorenberghe, 2011. "Trade between symmetric countries, heterogeneous firms, and the skill premium," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 44(1), pages 148-170, February.
  7. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, Elsevier, vol. 42(1-2), pages 3-31, February.
  8. Alberto Behar, 2009. "Directed technical change, the elasticity of substitution and wage inequality in developing countries," Economics Series Working Papers, University of Oxford, Department of Economics 467, University of Oxford, Department of Economics.
  9. Mauro Caselli, 2010. "Trade, skill-biased technical change and wages in Mexican manufacturing," CSAE Working Paper Series, Centre for the Study of African Economies, University of Oxford 2010-28, Centre for the Study of African Economies, University of Oxford.
  10. Elena Meschi & Erol Taymaz & Marco Vivarelli, 2010. "Trade, Technology And Skills: Evidence From Turkish Microdata," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) dises1062, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  11. Adrian Wood, 2002. "Globalization and wage inequalities: A synthesis of three theories," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 138(1), pages 54-82, March.
  12. Leonardi, Marco, 2005. "Firm Heterogeneity in Capital labor Ratios and Wage Inequality," Institute for Research on Labor and Employment, Working Paper Series, Institute of Industrial Relations, UC Berkeley qt1g9514wh, Institute of Industrial Relations, UC Berkeley.
  13. Anderson, Edward, 2005. "Openness and inequality in developing countries: A review of theory and recent evidence," World Development, Elsevier, Elsevier, vol. 33(7), pages 1045-1063, July.
  14. Irarrazabal, Alfonso & Moxnes, Andreas & Opromolla, Luca David, 2010. "The Tip of the Iceberg: Modeling Trade Costs and Implications for Intra-Industry Reallocation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7685, C.E.P.R. Discussion Papers.
  15. Daron Acemoglu, 2007. "Introduction to Modern Economic Growth," Levine's Bibliography 122247000000001721, UCLA Department of Economics.
  16. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 73, pages 557.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:2010-27. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Payne).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.