Impact Of Wage Disparity On The Choice Of Directed Technological Change

Since the reform and opening-up, the technological direction, the supply of skills and wage disparity have different characters in different regions and between regions. In the internal, the supply of skills, the skill biased technological change and skill premium are increasing together, but there are differences between regions. For example, the ratio of skills is highest, the skill premium is higher, but the skill biased technological change is lowest in eastern region. If using the total factor productivity to decide whether the biase of technological change is appropriate, we can find the TFP is highest in eastern region and that is lowest in the western region. So from the result, the technology in the east is appropriate. So the problem is which reasons can influence the direction of technological change. The directed technological change will increase the relative maginal product of one factor, then increase the relative demand of this factor even the relative price of it.Many researches have the conclusion that the higher supply of skills will induce the technological change biase skills, which can explain the change trend in the internal but can not explain the difference between regions. So besides the supply of skills, there could be other factors can affect the direction of technology. Based on the related literatures, the article tries to study the relationship between the wage disparity and technological change direction from the demand side and analysis the appropriate choice of technological change direction.In order to achieve the purpose, the study has three steps. Firstly, set up a model to explain the relationship between wage disparity and technological change direction. Secondly, having empirical test based on the theory model. Thirdly, make decomposition on wage disparity change to explain the different effect of wage disparity on technological change between regions.Section 3 sets up a model to analysis the effect of wage disparity on technological change direction. The first is nonhomothetic preference hypothesis and the second is that the producer has the power to make price. Comparing the market size effect and price effect in the two sale stages, we find that the income disparity through the structure of demand has the reaction on direction of technical change. If the consumption structure is similar between different social classes and the proportion of unskilled workers increases, the manufacturer prefers the skill-biased technology satisfying some conditions. Even though, we have the opposite result about the effect of labor structure on technical change direction from the supply side.Section4 is the empirical test. Analysis whether the wage disparity has effect on technological change direction and the effect is consistent with the model result through the regression in different periods and regions. There is a common result in different regions that the positive effect of skilled labor in supply side is bigger than the negative effect of that. The increase of skilled labor will induce the technical change biasing to skill. But the income disparity has a notable negative effect on SBTC only in eastern region. The technological change is influenced from supply side and demand side. The negative effect of wage disparity weakens the SBTC. But wage disparity has not the effect in middle and western region. That is the reason why the SBTC is lower in eastern region. The technological change direction is not appropriate in middle and western regions from comparing the total factor productivity.Section5 applies Oaxaca-Blinder decomposition technique based on the Quantile Regression to evaluate the change of wage disparity. The expansion of inequality is on the higher half of the wage distribution in the eastern region. But the middle and western region have the opposite result. The influencing factors include the education, experience, the ownership and the SBTC. The wage disparity change is more in lower-tail distribution between 1989 and 2006, but there is more inequilty in upper-tail between 1997 and 2006. The result explains why the wage disparity has lag-effect on technical change direction from 1981 to 2008, but not from 1995 to 2008. Besides the influence of these factors on wage disparity is mainly on the higher half in the eastern region, and on the lower half in the middle and western regions, which can explain why the wage disparity does not have the notable effect.The innovation of the dissertation is from the demand side to study the effect of wage disparity on technological change direction making a model and having the empirical test, which offer the support for the choice of appropriate technology.