Diffusion and directed technological knowledge, human capital and wages

By connecting the North-South diffusion and the bias of non-scale technological knowledge and by considering endogenous human capital, we relate the technological-knowledge diffusion with levels, inter-country gaps, growth rates, wage-inequality paths and specialisation patterns. Inter-country gaps fall towards the steady state and the South produces more final goods at the end of the adjustment process. Moreover, it exports relatively more final goods of the type that uses more intensively the relatively abundant human capital and imitated intermediate goods. However, outputs, wages and prices remain different and differences in prices originate the intra-country wage-inequality paths observed in developed and developing countries, since the early 1980s.

► North-South trade affects the technological-knowledge bias and diffusion. ► The South enjoys a level effect and inter-country gaps fall towards the steady state. ► The South produces more final goods at the end of the adjustment process. ► However, outputs, wages and prices are always higher in the North. ► Intra-country wage-inequality paths are in line with the observed paths.