A Note on Wage Inequality, Technology, and Trade

Chu-Ping Lo

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DOI: 10.4236/me.2011.23037                

Abstract

Zeira (2007) presents a two-country model of endogenous technology and trade, illustrating that trade liberalization reduces wage inequality in developing countries. The result contrasts the current outsourcing trade literature; the conflict is due to the critical assumption made in his model that “the most rewarding technologies are invested first.” If we relax this assumption, or allow the technology frontier to foster labor gains in all existing industries, then Zeira’s model is, in fact, consistent with the current outsourcing trade literature.

Keywords

Wage Inequality, International Outsourcing Trade

Conflicts of Interest

The authors declare no conflicts of interest.

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