The Endogenous Skill Bias of Technical Change and Inequality in Developing Countries

February 26, 2013

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Format: Chicago

Alberto Behar. The Endogenous Skill Bias of Technical Change and Inequality in Developing Countries, (USA: International Monetary Fund, 2013) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper draws on existing empirical literature and an original theoretical model to argue that globalization and skill supply affect the extent to which technology adoption in developing countries favors skilled workers. Developing countries are experiencing technical change that is skill-biased because skill-biased technologies are becoming relatively cheaper. Increased skill supply further biases technical change in favor of skilled labor. 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. These features aid our understanding of the observed rises in inequality within developing countries and the absence of a significant downward effect of expanded educational attainment on skill premia. They also help account for the large and differential effects of trade liberalization on inequality. These findings are pertinent for the Middle East and North Africa because of its recent increase in trade openness and remarkable rise in educational attainment.

Subject: Income inequality, Labor, National accounts, Skilled labor, Technology, Unskilled labor, Wages

Keywords: Capital deepening, East Africa, Endogenous price differential, Endogenous skill-biased technical change, Feedback effect, GDP share, Global, Goods trade, Inclusive Growth, Income Inequality, Intermediates goods market, Middle East, Net importer, North Africa, Price terms, R&D cost, Relative price, Skill-biased Technical Change, Skilled labor, Skill-enhancing trade hypothesis, Substitution effect, Trade openness, Unskilled labor, Wages, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/050
Stock No:

WPIEA2013050
ISBN:

9781475536959
ISSN:

1018-5941

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