Skill-biased also examines that opening tointernational trade affects

Skill-biased technological change is a very important contributor towards the increased level of inequality.In this paper, there is presented the case which indicates that technical change is not necessarilyskill-biased but, is a result of increasing availability of different skill-biased technologies thathave been researched and developed by advanced countries. The study also examines that opening tointernational trade affects the relative prices of skill-intensive products which impacts the adoption ofskill bias of technology. MICs are considered to be more skill-abundant as compared to other countriesso liberalization of trade will increase the relative price of skill-intensive products and make theadoption of skill-biased technologies easier and attractive. The opposite is true for economies that areskill-scarce. Skill-biased technological changes help in explaining critiques of trade-based explanationsrelated to increased inequality. Skill bias can also be determined by the endowment of skilledlabour which is why an increment in the supply of skilled labour stimulates SBTC such that supply ofskill creates its own demand.This phenomenon has also been explained from two different perspectives which tend to provide verydifferent views about what empirical evidences are relevant for defining wage inequality. For example,in the labour perspective, technological changes involve appropriate factor bias whereas, in thetrade perspective, there is a requirement of appropriate sector bias. In the former model, trade servesto be a factor that shifts supply whereas, in the latter model, it serves to be a demand shifter. Moreover,in the labour perspective, shift in supply always have an impact over wages which is not the casein the trade perspective. Despite these stark differences it is very important to understand that empiricalevidences that support both the perspective have, on balance, contributed towards the aspect thatinternational trade has a very insignificant role in the rising inequality situation.Are one from these two perspective right and the other one wrong? It cannot be judged on explanatorypower only as both offers an internally consistent story for the recent movement of skill premium.On some basic level, this judgment hugely depends over the preferences about theory. Beyond this,there is also scope for further empirical work which maintains its focus in distinguishing the two perspectives.This phenomenon also helps in explaining pervasive increased wage inequality because the technologiesthat developing counties can access are increasingly used to favor skilled workers even if theseeconomies are skill scarce lack of educational attainment for reducing wage inequality can be attributedto induced SBTC which acts against the standards substitution effect. Trade-induce skillbiasedtechnological changes help in defining the negative correlation between trade and inequality.


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