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The endogenous skill bias of technical change and wage inequality in developing countries

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  • Alberto Behar

Abstract

This paper draws on existing empirical literature and an original theoretical model to argue that technical change does not have to be skill-biased in developing countries. Instead, the extent to which technology adoption in developing countries favors skilled workers depends on a number of factors. Free trade induces technology that favors skilled workers in skill-abundant developing countries and that favors unskilled workers in skill-scarce developing countries, and therefore amplifies the predicted wage effects of trade liberalization. Developing countries experience technical change that is skill-biased when imported skill-biased technologies become relatively cheaper. Increased skill supply further biases technical change in favor of skilled labor. These features aid our understanding of the observed rises in inequality within developing countries, the absence of a significant downward effect of expanded educational attainment on skill premia, and the differential effects of trade liberalization on inequality.

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  • Alberto Behar, 2016. "The endogenous skill bias of technical change and wage inequality in developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(8), pages 1101-1121, November.
    • Handle: RePEc:taf:jitecd:v:25:y:2016:i:8:p:1101-1121
    DOI: 10.1080/09638199.2016.1193887
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    Cited by:

    1. Pi, Jiancai & Zhang, Pengqing, 2018. "Skill-biased technological change and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 347-362.
    2. Joshua Aizenman & Yothin Jinjarak & Nam Ngo & Ilan Noy, 2018. "Vocational Education, Manufacturing, and Income Distribution: International Evidence and Case Studies," Open Economies Review, Springer, vol. 29(3), pages 641-664, July.
    3. Mr. Alberto Behar, 2023. "The Elasticity of Substitution Between Skilled and Unskilled Labor in Developing Countries: A Directed Technical Change Perspective," IMF Working Papers 2023/165, International Monetary Fund.
    4. Seda Koymen‐Ozer, 2020. "Wage inequality, skill‐specific unemployment and trade liberalization," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 1016-1058, August.
    5. Valentin F. Lang & Ms. Marina Mendes Tavares, 2018. "The Distribution of Gains from Globalization," IMF Working Papers 2018/054, International Monetary Fund.
    6. Dianshuang Wang, 2019. "Manufacturing and agricultural pollution, private mitigation and wage inequality in the presence of pollution externalities," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(2), pages 51-58.
    7. Farole, Thomas & Hollweg, Claire & Winkler, Deborah, 2018. "Trade in Global Value Chain: An Assessment of Labor Market Implication," Jobs Group Papers, Notes, and Guides 30318036, The World Bank.
    8. Hina Shahzadi & Muhammad Nadim & Zain Ul Abidin, 2023. "The Impact Of Globalization On Income Distribution In Emerging Economies," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(2), pages 67-73.

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