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Directed technical change, the elasticity of substitution and wage inequality in developing countries

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  • Alberto Behar

Abstract

We develop a model of endogenous skill-biased technical change in developing countries. The model reconciles wildly dispersed existing estimates of the elasticity of substitution between more and less educated workers. It also produces an estimating equation for the elasticity, which allow us to produce overdue estimates for developing countries. With four types of data, elasticity estimates for developing countries are consistently about 2. In a skill-biased technical change framework, this estimate makes sense of what appears to be little or no correlation between relative skill supply and wage inequality.

Suggested Citation

  • Alberto Behar, 2009. "Directed technical change, the elasticity of substitution and wage inequality in developing countries," Economics Series Working Papers 467, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:467
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    File URL: https://ora.ox.ac.uk/objects/uuid:c2e16036-dedc-499a-93da-da66823f5369
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    Citations

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    Cited by:

    1. Finkelstein-Shapiro, Alan & Sarzosa, Miguel, 2012. "Unemployement Protection for Informal Workers in Latin America and the Caribbean," IDB Publications (Working Papers) 4542, Inter-American Development Bank.
    2. Nuno Torres & Óscar Afonso & Isabel Soares, 2017. "Manufacturing Skill-biased Wage Inequality, Natural Resources and Institutions," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1-29, November.
    3. Albert Jan Hummel & Vinzenz Ziesemer, 2021. "Food Subsidies in General Equilibrium," CESifo Working Paper Series 9201, CESifo.
    4. Behar Alberto, 2012. "Skill-Biased Technology Imports, Increased Schooling Access, and Income Inequality in Developing Countries," Journal of Globalization and Development, De Gruyter, vol. 2(2), pages 1-32, January.
    5. Mauro Caselli, 2014. "Trade, skill-biased technical change and wages in Mexican manufacturing," Applied Economics, Taylor & Francis Journals, vol. 46(3), pages 336-348, January.

    More about this item

    Keywords

    Skill-based technical change; Elasticity of substitution; Wage premium;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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