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Trade, Skill Biased Technical Change and Wage Inequality in South Africa

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  • Hildegunn E. Stokke
  • Jørn Rattsø

Abstract

Trade openness influences the wage structure via technology adoption in middle income countries. Given the econometric challenges of handling endogenous trade and technology interaction, we offer an alternative quantification based on calibration of a general equilibrium model. We expand the standard open economy Ramsey model to include comparative advantage, technology adoption and skill bias influenced by investment decisions. The calibration constructs a reference path for South Africa and allows counterfactual analysis of trade openness. The quantitative results imply that trade effects via technology adoption and skill bias can be an important determinant of wage inequality in middle income countries.

Suggested Citation

  • Hildegunn E. Stokke & Jørn Rattsø, 2012. "Trade, Skill Biased Technical Change and Wage Inequality in South Africa," DEGIT Conference Papers c017_049, DEGIT, Dynamics, Economic Growth, and International Trade.
    • Handle: RePEc:deg:conpap:c017_049
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    Cited by:

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    3. P. M. Picard & A. Tampieri, 2021. "Vertical differentiation and trade among symmetric countries," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1319-1355, June.
    4. Lin, Faqin & Fu, Dahai, 2016. "Trade, Institution Quality and Income Inequality," World Development, Elsevier, vol. 77(C), pages 129-142.

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