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The Endogenous Skill Bias of Technical Change and Inequality in Developing Countries

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  • Alberto Behar

Abstract

This paper draws on existing empirical literature and an original theoretical model to argue that globalization and skill supply affect the extent to which technology adoption in developing countries favors skilled workers. Developing countries are experiencing technical change that is skill-biased because skill-biased technologies are becoming relatively cheaper. Increased skill supply further biases technical change in favor of skilled labor. Free trade induces technology that favors skilled workers in skill-abundant developing countries and that favors unskilled workers in skill-scarce developing countries, and therefore amplifies the predicted wage effects of trade liberalization. These features aid our understanding of the observed rises in inequality within developing countries and the absence of a significant downward effect of expanded educational attainment on skill premia. They also help account for the large and differential effects of trade liberalization on inequality. These findings are pertinent for the Middle East and North Africa because of its recent increase in trade openness and remarkable rise in educational attainment.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/50.

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Length: 31
Date of creation: 26 Feb 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/50

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Keywords: Skilled labor; Developing countries; Technology transfer; Economic models; skilled workers; unskilled labor; trade liberalization; unskilled workers; trade openness; closed economy; elasticity of substitution; international trade; open economy; income differentials; effects of trade liberalization; world price; impact of trade; intermediate inputs; income distribution; net exports; technology adoption; trade liberalizations; endogenous growth; increased trade; average tariffs; perfect substitutes; constant elasticity of substitution; multilateral trade liberalization; impact of trade liberalization; pattern of specialization; global trade; factor markets; trade data; access to technology; global standards; intermediate goods; closed economies; domestic production; international integration; free entry; liberalization of trade in goods; factor endowments; transition economies; global economy; nontariff barriers; black market premium; multinational corporations; increased openness;

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References

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