Globalization and Skill Biased Technical Change: The Implications of Labor Market Rigidities
Traditional Heckscher-Ohlin reasoning predicts that in open economies sector bias of technical change determines wages and may induce firms to lower skill ratios. Skill bias plays a minor role – at best. The paper discusses sufficient conditions for skill bias of ICT nevertheless to be a major source of labor market developments. As it turns out, labor market implications can differ fundamentally depending on factor market institutions: with flexible labor markets, labor market implications fundamentally depend on demand side elasticities, whereas labor market rigidities make the elasticities on the supply side decisive. The latter may also explain why firms actually increase skill ratios.
Volume (Year): 61 (2008)
Issue (Month): 1 ()
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