The rise of wage and employment inequalities in advanced economies: the interactions between openness and technical progress.

Summary This paper analyzes the interactions between technical progress and North-South openness to explain the increase in wage and employment inequalities between skilled and unskilled workers observed over the last twenty-five years in industrialized countries. We construct a North-South general equilibrium model with endogenous growth aiming at integrating in a unified approach the interactions between North-South openness, the computerization of productive processes, and factor wages. This model is simulated in three main scenarios: autarky in the North, competitive North-South openness, openness with a minimum wage in the North. The results are: - The shift to competitive openness leads to a sharp increase in the skill premium and a slowdown in technical progress and productivity. - The minimum wage creates unemployment among the unskilled, but increases technical progress, productivity, and real income per capita in the long run.