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Directed Technological Change: A Knowledge-Based Model

Author

Listed:
  • Shiyuan Pan

    (Center for Research of Private Economy and School of Economics, Zhejiang University)

  • Heng-fu Zou

    (Central University of Finance and Economics, CEMA)

  • Tailong Li

    (School of Economics & Management, Zhejiang Sci-Tech University)

Abstract
We develop a knowledge-based growth model to address the issues of directed technological change, wage inequality and economic growth, in which skilled workers are used both in innovation and production. Since skill-biased technological change may lead to a decrease in the average productivity in R&D sectors, scale effect is removed. Free trade between developed countries increases the demand for skilled workers employed in the production of the skill-intensive good, thus promoting skill-biased technological change through the market size e¡èect and an increase in skill premia. In contrast, free trade between developed and developing countries reduces the profits of skill-complementary innovation, since its market is relatively small in the developing country. Thus, international trade may lead to skill-replacing technological change and decrease wage inequality in the developed country. Wage inequality, however, increases in the developing countries since the degree of skill bias of technology in the developing country in the open economy is greater than the one in autarky. Skill-biased technological change has opposite e¡èects on economic growth, therefore trade stimulates economic growth in some circumstances, and hurts it in other circumstances.

Suggested Citation

  • Shiyuan Pan & Heng-fu Zou & Tailong Li, 2010. "Directed Technological Change: A Knowledge-Based Model," CEMA Working Papers 391, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:391
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    References listed on IDEAS

    as
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    6. Batas Bjelić, Ilija & Rajaković, Nikola & Ćosić, Boris & Duić, Neven, 2013. "Increasing wind power penetration into the existing Serbian energy system," Energy, Elsevier, vol. 57(C), pages 30-37.
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    More about this item

    Keywords

    Directed Technological Change; Wage Inequality; Scale Effect; Trade; Growth;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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