Location of Repository

Trade, wage inequalities and disparities between countries: the technology connection

By Gilles Duranton

Abstract

This paper takes seriously the idea that international trade has played an important role in explaining both some convergence between developed economies as well as rising inequalities at the personal level. Previous studies used traditional trade theory as a reference framework. The empirical consensus is now that differences in factor endowment explain at best a small fraction of rising wage inequalities. This argument, by contrast, builds on labor specialization and increasing returns. Deeper economic integration allows trade in differentiated intermediate goods and primary tasks, thus transforming local increasing returns into global increasing returns. This pushes towards geographical equalization. At the same time, deeper integration also increases the size of the pool of available skilled workers. This may lead them to a 'technological secession' as it makes more skill-demanding technologies more profitable. Technological secession in turn fosters wage inequalities at the personal level

Topics: HB Economic Theory
Publisher: Blackwell Publishing
Year: 1999
DOI identifier: 10.1111/j.1468-2257.1999.tb00041.x
OAI identifier: oai:eprints.lse.ac.uk:7270
Provided by: LSE Research Online
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.wiley.com/bw/journa... (external link)
  • http://eprints.lse.ac.uk/7270/ (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.