Premium
Trade, Skill Biased Technical Change and Wage Inequality in S outh A frica
Author(s) -
Rattsø Jørn,
Stokke Hildegunn E.
Publication year - 2013
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12045
Subject(s) - openness to experience , economics , counterfactual thinking , wage , wage inequality , investment (military) , inequality , free trade , econometrics , international economics , microeconomics , labour economics , psychology , social psychology , mathematical analysis , philosophy , mathematics , epistemology , politics , political science , law
Trade openness influences the wage structure via technology adoption in middle income countries. Given the econometric challenges of handling endogenous trade and technology interaction, we offer an alternative quantification based on calibration of a general equilibrium model. We expand the standard open economy R amsey model to include comparative advantage, technology adoption and skill bias influenced by investment decisions. The calibration constructs a reference path for S outh A frica and allows counterfactual analysis of trade openness. The quantitative results imply that trade effects via technology adoption and skill bias can be an important determinant of wage inequality in middle income countries.