Discussion paper

DP2677 Relative Wages and Trade-Induced Changes in Technology

We develop a model where trade liberalization leads to skill-biased technological change, which in turn raises the relative return to skilled labour. As firms get access to a larger market, they have incentives to choose a more skill-intensive technology because a lowering of variable costs requires additional use of skilled labour. This way, we establish a link between trade, technology and relative returns to skilled and unskilled labour. Moreover, we show that as market integration continues and trade costs fall below a certain threshold, the relative return to skilled labour may fall.

£6.00
Citation

Ulltveit-Moe, K and K Ekholm (2001), ‘DP2677 Relative Wages and Trade-Induced Changes in Technology‘, CEPR Discussion Paper No. 2677. CEPR Press, Paris & London. https://cepr.org/publications/dp2677