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Learning-by-doing, technology-adoption costs and wage inequality

  • Afonso, Oscar
  • Leite, Rui

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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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 27 (2010)
Issue (Month): 5 (September)
Pages: 1069-1078

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Handle: RePEc:eee:ecmode:v:27:y:2010:i:5:p:1069-1078
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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