Skill Bias, Trade, and Wage Dispersion

Monte, Ferdinando (2009): Skill Bias, Trade, and Wage Dispersion.

Abstract

Wage ratios between different percentiles of the wage distribution have moved in parallel and then diverged in the U.S. in the last 50 years. In this paper, I study the theoretical response of wage ratios to skill-biased technical change and trade integration. I build a simple model of heterogeneous technology and workers that features complementarities between the quality of ideas and abilities. I show that both shocks can reproduce the observed pattern since (i) they have similar asymmetric effects on productive vs. unproductive firms, and (ii) positive assortative matching in the labor market transmits this asymmetry across high and low skill workers. Focusing on the different channels through which skill-biased technical change and trade integration operate suggests ways to disentangle the magnitude of each.

• Item Type: MPRA Paper
• Language: English
• Keywords: intra-industry trade; skill-biased technical change; local change in inequality; intra-�firm rent distribution.
• Subjects: F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions; D - Microeconomics > D3 - Distribution > D33 - Factor Income Distribution; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

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