Trade, technology and income distribution

The relationship between trade, technology and income distribution is explored in three chapters.; Chapter 1 examines the effect of income distribution, both within and across countries, on the pattern of international trade. In standard trade theory, consumption is normally assumed to be homothetic. Consequently, income and its distribution would have no role in determining international trade. The chapter examines the assumption and its implications. The common assumption is statistically rejected at 1% significance level. A counter-factual experiment reveals that the demand-induced trade due to differences in income and its distribution amounts to 6.2% of world expenditure. We further demonstrate that non-homothetic taste helps explain some trade puzzles and paradoxes.; Chapter 2 examines the effect of trade and technology on skill upgrading and production efficiency for Canadian manufacturing industries. We find that both computer technology and foreign outsourcing are important in explaining the skill upgrading that occurred during 1981--1996, and that their relative importance is dependent on the ways that technology is measured. Foreign outsourcing is found to have induced significant cost reduction for the Canadian manufacturing sector.; Chapter 3 examines the role of trade and technology to the increasing wage gap between the skilled and non-skilled workers in Canada during the 80s and 90s. It adopts the two-stage mandated wage regression in its investigation. The first stage endogenizes product price changes and productivity growth. We find some evidence of the "pro-competitive" effect of trade on domestic product market---both import price competition and foreign outsourcing are significant in increasing productivity and reducing domestic product prices. We also find that the competitiveness of a market and the adoption of computer technology increase productivity. The second stage estimates the wage impact. The net effect of foreign factors on wage inequality is very small, only about one-tenth or less of the effect of high technology.