The Advance of Information Society and Wage Inequality

We analyze the consequence of the development of digital information technology, the increase of skilled labor, the increase of knowledge-based service trade in the advanced country. The analytical consequences are as follows: The traditional Stolper Samuelson Theorem applies in our model even though economy of scale exists through fixed factor cause and intra-industry trade, not just the inter-industry trade, is allowed. Thus when the relative factor endowments are different between the trading partner countries, the increase of knowledge-based service trade results in the increase of wage inequality but the rational for that is similar with Stolper-Samuelson theorem unlike Yoon(2002). The advance of information technology itself does not change the wage inequality. However, the skilled-labor biased technological change, preferential change toward technology goods and the increase of skilled labor are likely to happen along the advance of information society. These changes affect the wage inequality. Thus if the advance of information technology increases the wage inequality, it is because the effects of skilled-labor biased technology and preferential change toward technology goods together dominate the effect of skilled-labor increase along the advance. Therefore it is the educational policy i.e., the increasing the skilled labor enough that can diminish the wage inequality along the advance of information society.