The Labor Market Consequences of Appropriate Technology

Gustavo de Souza

No 2208, CEPREMAP Working Papers (Docweb) from CEPREMAP

Abstract: Developing countries rely on technology created by developed countries. This paper demonstrates that such reliance increases wage inequality but leads to greater production in developing countries. I study a Brazilian innovation program that taxed the leasing of international technology to subsidize national innovation. By exploiting heterogeneous exposure, I show that the program led firms to replace technology licensed from developed countries with in-house innovations, which led to a decline in both employment and the share of high-skilled workers. I explain these findings using a model of directed technological change and cross-country technology transactions. Firms in a developing country can either innovate or lease technology from a developed country, and these two technologies differ endogenously regarding productivity and skill bias due to factor supply disparities in the two countries. I show that the difference in skill bias and productivity can be identified using closed-form solutions by the effect of the innovation program on firms’ expenditure share with lowskilled workers and employ- ment. By calibrating the model to reproduce these effects, I find that increasing the share of firms that patent in Brazil by 1 p.p. decreases the skilled wage premium by 0.02% and production by 0.2%.

Keywords: labor market; technology; wages (search for similar items in EconPapers)
Pages: 175 pages
Date: 2022-06
New Economics Papers: this item is included in nep-dev, nep-gro, nep-lma and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cpm:docweb:2208

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