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Trade, Technology Adoption and Wage Inequalities: Theory and Evidence

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  • Maria Bas

Abstract

This paper develops a model of trade that features heterogeneous firms, technology choice and different types of skilled labor in a general equilibrium framework. Its main contribution is to explain the impact of trade integration on technology adoption and wage inequalities. It also provides empirical evidence to support the model's predictions using plant-level panel data from Chile's manufacturing sector (1990-1999). The theoretical framework offers a possible explanation of the puzzling increase in skill premium in the developing countries. The key mechanism is found in the effects of trade policy on the number of new firms upgrading technology and on the skill-intensity of labor. Trade liberalization pushes up export revenues, raising the probability that the most productive exporters will upgrade their technology. These firms then increase their relative demand for skilled labor, thereby raising inequalities.

Suggested Citation

  • Maria Bas, 2008. "Trade, Technology Adoption and Wage Inequalities: Theory and Evidence," CEP Discussion Papers dp0902, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0902
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    References listed on IDEAS

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    1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
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    Cited by:

    1. Monia Ghazali, 2010. "Trade Openness, Relative Demand of Skilled Workers and Technological Change in Tunisia, 1998–2002," Working Papers 554, Economic Research Forum, revised 10 Jan 2010.
    2. Swati Dhingra, 2011. "Trading Away Wide Brands for Cheap Brands," CEP Discussion Papers dp1103, Centre for Economic Performance, LSE.
    3. Marco Pinto & Jochen Michaelis, 2014. "International Trade and Unemployment—the Worker-selection Effect," Review of International Economics, Wiley Blackwell, vol. 22(2), pages 226-252, May.
    4. Monia Ghazali, 2012. "Trade, Technology and the Demand for Skills in Tunisia, 1998--2002," Oxford Development Studies, Taylor & Francis Journals, vol. 40(2), pages 213-230, June.
    5. Rauch, James E., 2010. "Development through synergistic reforms," Journal of Development Economics, Elsevier, vol. 93(2), pages 153-161, November.
    6. Ferguson, Shon, 2012. "Cross-Industry Heterogeneity in Export Participation: The Role of Scale Economies in R&D," Working Paper Series 930, Research Institute of Industrial Economics.

    More about this item

    Keywords

    Firm heterogeneity; trade reforms; technology adoption; skill premium; plant panel data;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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