SBTC versus trade: testing skill-premia evidence across 25 OECD countries

Abstract

The recent widening of intra-country wage inequality in favour of high-skilled labour has been attributed by some authors to Skill-Biased Technological Change (SBTC) and by others to International Trade (IT) liberalization. As few empirical studies have tried to assess both explanations across a comprehensive sample of countries, we analyse the impact of both explanations within a unified framework and across 25 Organisation for Economic Co-operation and Development countries. Results suggest that the SBTC (IT) explanation dominates in developed (developing) countries and when intra-country wage inequality is measured by the wage ratio of college-to-lower (upper)-secondary graduates.