Human Capital Accumulation and Wage Inequality with Scale-Independent North-South Technological Diffusion
AbstractThis paper analyzes the mechanisms, other than market size, through which international trade of intermediate goods incorporating state-of-the-art technological knowledge affects accumulation of human capital and wage inequality in the North and South. Under North-South technological diffusion, endogenous economic growth depends on Schumpeterian R&D - innovation in the North and imitation in the South - and on accumulation of two types of human capital, wide and narrow. The former is school intensive while the latter is on-the-job-training intensive. The effects of trade upon growth and wage inequality, through the price channel, are accessed in three analytical steps: (i) immediate level effects, (ii) steady-state effects, and (iii) transitional dynamics. Comparative steady-state statics and dynamics are used to uncover the mechanisms through which these effects are influenced by the technology of human capital accumulation. The level effect brings about inter-country wage convergence. The comparative dynamics exercise with changes in the parameters of human capital accumulation shows that intra-country wage inequality is more likely to prevail under international trade, when such changes relatively enhance the world accumulation of the type of human capital that is relatively abundant in the South.
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Bibliographic InfoPaper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_026.
Length: 27 pages
Date of creation: Jun 2004
Date of revision:
North-South; International trade; Technological knowledge; Economic growth; Human capital; Wage inequality.;
Find related papers by JEL classification:
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- 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
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
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