Technology, trade and inequality

Research, Preprint English OPEN
Bjørnstad, Roger ; Skjerpen, Terje (2003)
  • Publisher: Statistics Norway, Research Department
  • Journal: (issn: /1892-753x)
  • Subject: Technological changes | JEL classification: E24 | Education levels | JEL classification: E27 | Skill-bias technological change; international trade; centralized wage setting; inequality; labour demand; macroeconometric model. | :Social science: 200::Economics: 210::Econometrics: 214 [VDP] | Wages | Inequality | Macroeconometric models | JEL classification: F16 | Labour demand | JEL classification: O33 | International trade
    • jel: jel:E24 | jel:F16 | jel:E27 | jel:O33

Abstract: In recent decades new technology has led to increasing demand for well-educated labour at the expense of labour with lower education levels. Moreover, increased imports from low-cost countries have squeezed out many Norwegian manufacturing firms employing a sizeable share of workers with low education. In this article a large macroeconomic model for Norway (MODAG) is used to quantify the importance that technological developments and competition from low-cost countries have had for the economy and for low- and high-educated labour. The results show that above all technological developments, but also increased trade with low-cost countries, have reduced demand for low-educated labour relative to well-educated labour. Wage formation factors have however meant a) that technological developments have also benefited those with low education who still hold a job, and b) that a relative fall in prices on goods from poor parts of the world has kept down wage differentials. Keywords: Skill-bias technological change, international trade, centralized wage setting, inequality, labour demand, macroeconometric model.
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