We modify the standard trade model introducing the possibility of biased technological changes. This model help to explain the falling labor shares as well as the mixed changes in skill premium in developing countries after trade liberalization takes place

We use annual data on capital's share and relative factor prices from 35 US industries from 1960 to 2005 to test the induced innovation hypothesis. We derive, from a productionfunction framework, testable implications for the effect of contemporaneous and lagged factor price ratios on capital's...