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Skill-biased technological knowledge without scale effects

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In the skill-biased technological change literature, the technological-knowledge bias, which drives wage inequality, is determined by the market-size channel. Motivated by the literature on scale effects since Jones (1995a, b), the standard R&D technology is modified so that wage inequality results similarly from the technological-knowledge bias, which is instead induced by the price channel. Thus, by solving the transitional dynamics numerically, it is shown that the recent rise of the skill premium, which is highlighted by, e.g., Acemoglu (2002a), arises from the price-channel effect, complemented with a mechanism that can be called technological-knowledge-absorption effect.

Document Type: Research Article


Affiliations: CEMPRE, Faculdade de Economia, Universidade do Porto, R. Roberto Frias, 4200-464 Porto, Portugal

Publication date: January 20, 2006

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