Relative Wages and Trade-Induced Changes in Technology

Karen Helene Ulltveit-Moe and Karolina Ekholm ()

No 2677, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a model where trade liberalization leads to skill-biased technological change, which in turn raises the relative return to skilled labour. As firms get access to a larger market, they have incentives to choose a more skill-intensive technology because a lowering of variable costs requires additional use of skilled labour. This way, we establish a link between trade, technology and relative returns to skilled and unskilled labour. Moreover, we show that as market integration continues and trade costs fall below a certain threshold, the relative return to skilled labour may fall.

Keywords: Trade; Imperfect competition; Technology; Trade liberalization; Wages (search for similar items in EconPapers)
JEL-codes: F02 F12 J31 (search for similar items in EconPapers)
Date: 2001-01
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Citations: View citations in EconPapers (10)

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Journal Article: Relative wages and trade-induced changes in technology (2005)
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