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Technology, Trade, and Wages

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  • James D. Adams

Abstract

Considerable effort has been devoted in recent years to the description of wage structure. This research has documented a rising return to education, unobserved skill, and work experience, but there is little research into causes of the change in structure. This paper seeks to fill the gap by study- ing the impact of domestic technology, foreign technology and trade on U.S. wages. The standard model of general equilibrium presented shows that each effect tends to be opposite in sign for high and low skilled labor. We then modify the model to allow for accumulation of sector-specific skills and sec- toral immobility. In this version shocks have the same direction of effect on high and low skilled workers. In the empirical work we devise measures of foreign and domestic R&D inputs for 6 sectors of the private U.S. economy, and of R&D outputs for 24 manufacturing industries. Holding time and industry effects constant we find that in most cases technology has the same, not oppo- site effect on wages at both skill levels; a rise in the foreign share in world innovation or US patents decreases US wages; an increase in the US share in world innovation or US patents raises US wages, especially for the less skilled; and the stock of world innovation and US patents decreases real wages especially for the less skilled. Turning to the relative skilled wage, we find that the stock of world innovation or US patents increases the skill differen- tial. Holding technology constant we find mixed results for trade. Effects of trade on real wages are generally insignificant once time effects are taken into consideration. Our findings suggest that sectoral labor immobility is a factor in the interaction between the U.S. labor market, technology and trade technology is a key element in the twists of the wage structure, and in and of itself, trade may not be an important determinant of real wages.

Suggested Citation

  • James D. Adams, 1997. "Technology, Trade, and Wages," NBER Working Papers 5940, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5940
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 285-326.
    3. repec:fth:harver:1473 is not listed on IDEAS
    4. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
    5. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-266, April.
    6. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
    7. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
    8. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders and Product Cycles," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 557-586.
    9. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," Review of Economic Studies, Oxford University Press, vol. 9(1), pages 58-73.
    10. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557-557.
    11. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
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    13. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
    14. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
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    Citations

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    Cited by:

    1. Wolff, Edward N., 2002. "The impact of IT investment on income and wealth inequality in the postwar US economy," Information Economics and Policy, Elsevier, vol. 14(2), pages 233-251, June.
    2. Pablo Acosta, 2001. "Los determinantes de la desigualdad en los ingresos laborales: El rol de las nuevas tecnologías y la apertura comercial," Department of Economics, Working Papers 034, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    3. Madanmohan Ghosh, 2007. "R&D Policies and Endogenous Growth: A Dynamic General Equilibrium Analysis of the Case for Canada ," Review of Development Economics, Wiley Blackwell, vol. 11(1), pages 187-203, February.

    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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