Rui Leite () (Faculdade de Economia, Universidade do Porto, Portugal) Óscar Afonso () (CEMPRE and Faculdade de Economia, Universidade do Porto, Portugal)
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In the dominant literature, the technological-knowledge bias that drives wage inequality is determined by the market-size channel. We develop an endogenous growth model with two technologies in which: a specific quality of labour, low or high-skilled, is combined with a specific set of quality-adjusted intermediate goods; the market-size channel is practically removed; adoption costs and learning-by-doing are linked with labour endowments. By solving transitional dynamics numerically, we show that changes in the supply of labour affect learning-by-doing and technology-adoption costs, which, in turn, influence the technological-knowledge bias and thus wage inequality. The proposed mechanisms can accommodate facts not explained by the previous literature.
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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number
272.