Abstract
The development of the Internet is often seen as a source of demand for skilled workers and therefore a potential driver of the wage gap between skilled and unskilled workers. This paper focuses on the impact that international trade in online platforms has on the skilled-unskilled wage gap. Because online trade allows smaller firms with relatively more unskilled workers to access world markets, one can expect an expansion of online exports to reduce the wage gap. After correcting for potential endogeneity bias in a sample of 22 developing countries for which online trade and wage gap data can be matched, we find that a 1 percent increase in the share of online exports over GDP leads to a 0.01 percent decline in the skilled-unskilled wage gap.
Highlights
We explore the impact of online international trade on the wage gap between skilled and unskilled workers
We examine the impact of online exports in reducing the wage gap between skilled and unskilled workers
We find that the impact of online exports is stronger in countries where the share of the labor force in small firms is larger
Summary
We explore the impact of online international trade on the wage gap between skilled and unskilled workers. It contributes to the debate on how technological progress affects skilled and unskilled workers, and income inequality. The existing literature has concluded that both trade and skill biased technological progress play a role in explaining changes in the wage gap between skilled and unskilled workers. These changes substantially contribute to the evolution in income inequality.
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