International knowledge spillovers and wage inequality in developing countries |
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| Authors: | Ming-cheng Wang Chen-ray Fang Li-hsuan Huang |
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| Institution: | aDepartment of Economics, National Central University, Chungli 320, Taiwan, ROC;bDepartment of Economics, National Taipei University, 151, University Rd., San Shia, Taipei, 237, Taiwan, ROC;cDepartment of Economics, National Central University, Taiwan, ROC |
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| Abstract: | In this paper, international knowledge spillovers are incorporated in a horizontal innovation model, designed to explain the observed uncertain effects that openness of trade can have on wage inequality in small developing countries. Openness of trade can produce two different effects: an increase in the relative price of less-skilled labor-intensive products and a wider skill discrepancy due to knowledge spillovers from the more to less developed country. The former triggers a fall in the wage premium, while the latter widens the wage premium gap in a developing country. These two opposing forces explain the observed uncertain effects of openness to trade on wage inequality in developing countries. |
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| Keywords: | International knowledge spillovers Wage inequality Developing country Endogenous growth model |
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