The impact of technological change and international trade on the wage differential between skilled and unskilled workers

<p>The B.A. dissertation &laquo;The impact of technological change and international trade on the wage differential between skilled and unskilled workers&raquo; includes 2 figures, 4 tables, and 1 appendix. It consists of 52 pages. There are 35 sources that were used during the work on the dissertation. Keywords: skill premium, income inequality, international trade, biased technical change.</p><p>The increase in the wage differential between skilled and unskilled workers that was recently observed has stimulated research that attempt to find out what are the causes of income inequality. In general, the probable factors that could affect the income differentiation are international trade and biased technical change, which affects workers with different qualifications in different way. So, studying the impact of technological progress and international trade on the differential of wages between workers with different skills is quite important.</p><p>The purpose of this paper is to determine the impact of technological progress and international trade on the wage difference between skilled and unskilled workers. The object of this study is the phenomenon of wage differentiation among workers with different qualification, and the subject of the study is the increase of skill premium obtained by skilled workers.</p><p>The B.A. dissertation includes an introduction, three chapters and a conclusion. The first chapter &quot;Factors influencing the wage formation of skilled and unskilled workers&quot; provides an overview of theoretical approaches to this problem. The second chapter &quot;Investigation of the influence of various factors on the premium for the possession of skills in models of supply and demand for skilled and unskilled labor force&quot; starts with analysis of canonical model of supply and demand for the workforce and then continues with building a model where technological progress and international trade is introduced. In the end of the second chapter some hypotheses are putted forward which can be tested by use of available data. The third chapter &quot;The econometric study of the effect of international trade and technological progress&quot; presents an empirical study that tests the hypotheses. The data source of the dissertation is the database of The World Bank.</p><p>This testing revealed the presence of the positive impact of technological progress and international trade on skill premium, and positive relationship between demand for skills and technological progress that appeared to be skill-biased. It was found that increase in supply of skilled labor has little negative impact on the skill premium that can be partly explained by the presence of skill-biased technical change, and therefore the demand for skills almost match the growing supply.</p>