We investigate the impacts on the skill premium and on economic growth in an innovator-imitator general equilibrium growth model assuming: (a) directed technological change; (b) international trade of intermediate goods; (c) internal costly investment in both physical capital and R&D; and (d) complementarities between intermediate goods in aggregate production. With trade of intermediate goods, the complementarities degree and investment costs influence the economic growth of both countries, but do not affect the countries' skill premia, which are directed by technological knowledge. Additionally, in agreement with related empirical literature, openness to trade of intermediate goods leads to a higher equilibrium skill premium in both countries, whereas its impact on the common growth rate can vary in sign.
| IN TRO DUCT IO NThis paper develops a two-country skill-biased technological change growth model to investigate the impact of international trade of intermediate goods on the skill premium and the economic growth rate in developed and developing countries. We emphasize the role of the directed technological change mechanism in explaining the link between international trade, skill premium and economic growth, in the presence of internal costly investment in physical capital and R&D and complementarities between intermediate goods in production.Our main goal is to provide one theoretical accommodation for three simultaneous economic trends observed since the early 1980s in developed and developing countries, namely: (a) increasing technological-knowledge levels (Acemoglu, 2002(Acemoglu, , 2003Barro & Sala-i-Martin, 2004) Machin, 1998), especially in periods of trade openness and liberalization. Coe and Helpman (1995), Feenstra (1998) and Krugman (2000) are examples of specific related literature we wish to contribute to. Coe and Helpman (1995) reveal that developed countries account for most of the innovations in the world and that the benefits of innovative R&D are much more evenly distributed in the world than expenditures on innovative R&D, suggesting that technological knowledge is diffused internationally. Feenstra (1998) and Krugman (2000) stress the spectacular integration of the global economy through trade and also analyse the implications of globalization for wages. Experiences of simultaneous economic liberalization (e.g., Dicken, 2015;Gancia & Bonfiglioli, 2008) and growing wage premia of skilled over unskilled workers, have in fact been observed since the 1980s in developed and developing countries (e.g., Acemoglu, 2003;Acemoglu & Autor, 2011;Avalos & Savvides, 2006;Bound & Johnson, 1992;Brainerd, 1998;Goldin & Katz, 2010;Juhn, Murphy, & Pierce, 1993; Katz & Murphy, 1992;Machin & Van Reenen, 1998;Nickell & Bell, 1996;Zhu & Trefler, 2005). In the particular case of developing countries, Arbache, Dickerson, and Green (2004) survey increases in wage premium following liberalization in: Brazil (Green, Dickerson, & Arbache, 2001); Mexico (Hanson & Harrison, 1999;Robertson, 2004); Chile (...