Relative wages and trade-induced changes in technology
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- Discussion papers (SAM) 
We develop a model where trade liberalization leads to skill-biased technological change, which in turn raises the relative return to skilled labor. When firms get access to a larger market, the relative profitability of di¤erent technologies changes so that the relative profitability of the more skill-intensive technology increases. As the composition of firms changes to one with predominantely skill-intensive firms, the relative demand for skilled labor increases. This way, we establish a link between trade, technology and relative returns to skilled and unskilled labor.
UtgiverNorwegian School of Economics and Business Administration. Department of Economics