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Trade, Technology Adoption and Wage Inequalities: Theory and Evidence

Maria Bas

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper develops a model of trade that features heterogeneous firms, technology choice and different types of skilled labor in a general equilibrium framework. Its main contribution is to explain the impact of trade integration on technology adoption and wage inequalities. It also provides empirical evidence to support the model's predictions using plant-level panel data from Chile's manufacturing sector (1990-1999). The theoretical framework offers a possible explanation of the puzzling increase in skill premium in the developing countries. The key mechanism is found in the effects of trade policy on the number of new firms upgrading technology and on the skill-intensity of labor. Trade liberalization pushes up export revenues, raising the probability that the most productive exporters will upgrade their technology. These firms then increase their relative demand for skilled labor, thereby raising inequalities.

Keywords: Firm heterogeneity; trade reforms; technology adoption; skill premium; plant panel data (search for similar items in EconPapers)
JEL-codes: F10 F12 F41 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-lab and nep-opm
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Citations: View citations in EconPapers (7) Track citations by RSS feed

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Working Paper: Trade, technology adoption and wage inequalities: theory and evidence (2008) Downloads
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