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Price-Channel Effects of North-South Trade on the Direction of Technological Knowledge and Wage Inequality

  • Óscar Afonso

    ()

    (CEMPRE, Faculdade de Economia do Porto)

  • Álvaro Aguiar

    ()

    (CEMPRE, Faculdade de Economia do Porto)

This paper develops a general equilibrium endogenous growth model that emphasizes the mechanisms, other than market size, through which trade-induced North-South technological knowledge diffusion influences the direction of technological progress and, thus, the path of intra and inter-country wage inequality. In contrast with the market-size effect, more common in previous literature on skill-biased technological change, the operation of the price channel, central to this paper, predicts an increasing high-skilled technological bias following openness, which is more in line with the recent trends observed in developed and developing countries.

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 170.

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Length: 36 pages.
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:por:fepwps:170
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