Globalization and employment: imported skill biased technological change in developing countries

This paper discusses the impact of the international transfer of embodied technological change on the employment evolution of skills in a sample of low and middle income countries (LMICs). A large body of literature has already underlined the occurrence of widening wage and employment differentials between skilled and unskilled workers in high-income countries (HICs) (Katz and Autor, 1999). Such empirical evidence is consistent with both trade- and technology-based explanations while these competing theoretical frameworks predict opposite effects on within- country inequality in LMICs. Recent analytical advancements have found convergent elements between these two lines of research, especially in the prediction of the employment impact of technology transfer. However, a systematic lack of data in LMICs still hampers empirical research on the determinants of the witnessed increase in inequality in these economies. This paper provides a direct measure of technology transfer from HICs, that is from those economies which have already experienced the occurrence of skillbiased technological change, to LMICs. GMM techniques are applied to an original panel dataset comprising 28 manufacturing sectors for 23 countries over a decade. Econometric results provide direct robust evidence of the absolute skill-bias effect of technology import in LMICs which, therefore, represents an important determinant of the growing divide between skilled and unskilled workers in these countries.