IDEAS home Printed from https://ideas.repec.org/a/eee/joecas/v6y2009i1p105-117.html
   My bibliography  Save this article

The Role of Intangible Capital in Explaining Wage Inequality Between Skilled and Unskilled Workers

Author

Listed:
  • Dong, Qi Hong
  • Miller, Michael S.

Abstract

Trade liberalization and technological improvement have made the movement of intangible capital feasible. Once the accumulated tangible capital reaches a certain level, its lower unit cost will attract the inflow of intangible capital, which will demand higher-skilled-workers. This paper analyzes the role of intangible capital in raising the wages for skilled workers in both developed and developing countries. Drawing on the outsource model by Feenstra, we develop an expanded model with four rather than three inputs: skilled and unskilled labour, and tangible and intangible capital. A production function, a long-run cost function, and a unit-cost function for the final good are derived to illustrate theoretically that the flow of intangible capital can be one source of the wage inequality for both developing and developed countries.

Suggested Citation

  • Dong, Qi Hong & Miller, Michael S., 2009. "The Role of Intangible Capital in Explaining Wage Inequality Between Skilled and Unskilled Workers," The Journal of Economic Asymmetries, Elsevier, vol. 6(1), pages 105-117.
    • Handle: RePEc:eee:joecas:v:6:y:2009:i:1:p:105-117
    DOI: 10.1016/j.jeca.2009.01.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1703494915302978
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeca.2009.01.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
    2. Xu, Bin, 2003. "Trade liberalization, wage inequality, and endogenously determined nontraded goods," Journal of International Economics, Elsevier, vol. 60(2), pages 417-431, August.
    3. J. David Richardson, 1995. "Income Inequality and Trade: How to Think, What to Conclude," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 33-55, Summer.
    4. Robert Z. Lawrence & Matthew J. Slaughter, 1993. "International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2 Microec), pages 161-226.
    5. Leamer, Edward E, 1996. "Wage Inequality from International Competition and Technological Change: Theory and Country Experience," American Economic Review, American Economic Association, vol. 86(2), pages 309-314, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Manasse, Paolo & Stanca, Luca & Turrini, Alessandro, 2004. "Wage premia and skill upgrading in Italy: why didn't the hound bark?," Labour Economics, Elsevier, vol. 11(1), pages 59-83, February.
    2. Bernhard Heitger & Jürgen Stehn, 2003. "Trade, Technical Change, and Labour Market Adjustment," The World Economy, Wiley Blackwell, vol. 26(10), pages 1481-1502, November.
    3. Peter Gottschalk & Timothy Smeeding, 1995. "Cross National Comparisons of Levels and Trends in Inequality," LIS Working papers 126, LIS Cross-National Data Center in Luxembourg.
    4. Lee, Chinkook & Hanson, Kenneth, 1997. "The Factor Content of U.S. Trade: An Explanation for the Widening Wage Gap?," 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada 35781, Western Agricultural Economics Association.
    5. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    6. Williamson, Jeffrey G, 1997. "Globalization and Inequality, Past and Present," The World Bank Research Observer, World Bank, vol. 12(2), pages 117-135, August.
    7. Lücke, Matthias, 1997. "European trade with lower-income countries and the relative wages of the unskilled: an exploratory analysis for West Germany and the UK," Kiel Working Papers 819, Kiel Institute for the World Economy (IfW Kiel).
    8. Chiquiar, Daniel, 2008. "Globalization, regional wage differentials and the Stolper-Samuelson Theorem: Evidence from Mexico," Journal of International Economics, Elsevier, vol. 74(1), pages 70-93, January.
    9. Carsten Ochsen, 2006. "Zukunft der Arbeit und Arbeit der Zukunft in Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(2), pages 173-193, May.
    10. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    11. Fitzenberger, Bernd, 1996. "Wages, prices, and international trade: Trends across industries for an "export champion"," Discussion Papers, Series II 323, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    12. De Loo, Ivo & Ziesemer, Thomas, 1999. "Determinants Of Sectoral Average Wage and Employment Growth Rates in a Specific Factors Model with Production Externalities and International Capital Movements," Research Memorandum 006, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    13. Harris, Richard G. & Robertson, Peter E., 2013. "Trade, wages and skill accumulation in the emerging giants," Journal of International Economics, Elsevier, vol. 89(2), pages 407-421.
    14. De Loo, Ivo & Ziesemer, Thomas, 1998. "Determinants Of Sectoral Average Wage Growth Rates in a Specific Factors Model with International Capital Movements: The Case of Cobb-Douglas Production Functions," Research Memorandum 006, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    15. Yasuhiro Sato & Kazuhiro Yamamoto, 2007. "Trade impacts on skill formation: welfare improvements accompanied by rises in inequality," Discussion Papers in Economics and Business 07-12, Osaka University, Graduate School of Economics.
    16. Giordano Mion & Linke Zhu, 2010. "Import Competition from and Outsourcing to China: A Curse or Blessing for Firms?," CEP Discussion Papers dp1038, Centre for Economic Performance, LSE.
    17. Carsten Ochsen & Heinz Welsch, 2005. "Technology, Trade, and Income Distribution in West Germany: A Factor-Share Analysis, 1976–1994," Journal of Applied Economics, Taylor & Francis Journals, vol. 8(2), pages 321-345, November.
    18. Eva Katalin Polgar & Julia Woerz, 2011. "Trade With Central and Eastern Europe: Is It Really a Threat to Wages in the West?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-31, March.
    19. Oscar Afonso, 2012. "Scale-independent North-South trade effects on the technological-knowledge bias and on wage inequality," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(1), pages 181-207, April.
    20. John T. Addison & Douglas A. Fox & Christopher J. Ruhm, 2000. "Technology, Trade Sensitivity, and Labor Displacement," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 682-699, January.

    More about this item

    Keywords

    F12; F13; F43; Wage inequality; Skilled-labour demand; Intangible capital;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joecas:v:6:y:2009:i:1:p:105-117. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/the-journal-of-economic-asymmetries/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.