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Skill-Biased Technology Imports, Increased Schooling Access, and Income Inequality in Developing Countries
1International Monetary Fund
Citation Information: Journal of Globalization and Development. Volume 2, Issue 2, ISSN (Online) 1948-1837, DOI: 10.1515/1948-1837.1091, January 2012
- Published Online:
Why has schooling not countered the pervasive rises in wage inequality driven by skill-biased technical change? Using data and a model of directed technical change in which developing countries acquire technology licenses from abroad, we show technological change is skill-biased in the South simply because it is in the North. This causes permanently rising wage inequality in the South. We model expanded schooling access as producing relatively educated new cohorts of labor market entrants. This makes the market for skill-biased technologies more attractive, which generates accelerated skill-biased technical change, which leads to higher wage inequality and possibly stagnant unskilled wages.