Trade in Knowledge-Based Services; Factor Market Implications

Sang-Chul Yoon
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Sang-Chul Yoon: Sogang University

Korean Economic Review, 2002, vol. 18, 267-284

Abstract: Using a model of 'trade in knowledge-based services' (e-Trade), the paper presents that recently increased wage inequality in advanced economies primarily reflects intra-industry trade in knowledge-based services with other advanced economies. In order to highlight the effects of trade in knowledge-based services on the factor markets in the presence of digital marketplaces, the paper employs the Chamberlinian monopolistic competition theory of intra-industry trade in intermediate inputs. In this model, there will be welfare gains from intra-industry trades in knowledge-based services. However, e-Trade results in increased wage inequality between the skilled and unskilled labors in the presence of sector-specific productivity growth. As a result, it increases the skilled labors devoted to the service sector, and expands the size of the service/technology sector.

Keywords: e-Trade; intra-industry trade; knowledge-based services; monopolic competition; wage inequality (search for similar items in EconPapers)
JEL-codes: F12 F16 J31 (search for similar items in EconPapers)
Date: 2002
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