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Wage inequality and welfare effects of domestic technological progress: a dual economy approach

Author

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  • Takeho Nakamura

    (Graduate School of Economics, Nagoya University)

Abstract

This paper shows that technological progress caused by a domestic high-tech firm always increases the skilled-unskilled wage inequality, using a two-sector, two-labor model. Also, we derive a sufficient condition for the technological progress to be effective in increasing domestic welfare. In the Cobb Douglas production function case, if the equilibrium relative wage is greater than a threshold level, domestic welfare unambiguously increases in response to the technological progress. Moreover, we also provide some policy implications of our results, in the context of developing countries.

Suggested Citation

  • Takeho Nakamura, 2007. "Wage inequality and welfare effects of domestic technological progress: a dual economy approach," Economics Bulletin, AccessEcon, vol. 15(22), pages 1-14.
    • Handle: RePEc:ebl:ecbull:eb-07o10034
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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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