Wage inequality and welfare effects of domestic technological progress: a dual economy approach
This paper shows that technological progress caused by a domestic high-tech firm always increases the skilled-unskilled wage inequality, using a two-sector, two-labor model. Also, we derive a sufficient condition for the technological progress to be effective in increasing domestic welfare. In the Cobb Douglas production function case, if the equilibrium relative wage is greater than a threshold level, domestic welfare unambiguously increases in response to the technological progress. Moreover, we also provide some policy implications of our results, in the context of developing countries.
Volume (Year): 15 (2007)
Issue (Month): 22 ()
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