Relative wages and trade-induced changes in technology |
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Authors: | Karolina Ekholm Karen Helene Midelfart |
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Affiliation: | a The Stockholm School of Economics, Stockholm, Sweden b CEPR, London, UK c The Norwegian School of Economics and Business Administration, Helleveien 30, Bergen 5045, Norway |
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Abstract: | We develop a model where trade liberalization leads to skill-biased technological change, which in turn raises the relative return to skilled labor. When firms get access to a larger market, the relative profitability of different technologies changes in favor of the more skill-intensive technology. As the composition of firms changes to one with predominantly skill-intensive firms, the relative demand for skilled labor increases. This way, we establish a link between trade, technology and relative returns to skilled and unskilled labor. |
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Keywords: | F12 F15 J31 O33 |
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