completely reverse the one-sector effects of tc because tc changes the relative profitability of sectors.This alters intersectoral factor demands and thereby changes relative factor prices.Even in multi-sector models, there is also theoretical disagreement on the effect of tc on relative wages when tc affects product prices.Many authors have addressed some of these issues and seem to contradict each other in important ways: e.g., Baldwin and Cain (1997), Berman, et al (1997), Bhagwati and Dehejia (1994), Davis (1997), Krugman (1995), Leamer (1996), Richardson (1995), and Wood (1995). 1 Thus, there are two important unresolved issues with the sbtc hypothesis, one arising from data and the other from theory.Moreover, there is a noticeable disjoint between these two issues.Empirical work, mostly by labor economists, typically addresses pervasiveness versus acceleration.Theoretical work, mostly by trade economists, typically concerns factor bias versus sector bias.The object of this paper is to reconcile these two issues.We aim to do this by first presenting a theoretical framework that clarifies both these issues.Second, we apply this framework to cross-country data.We proceed as follows.We begin by analyzing relative labor demand and wages in a simple general-equilibrium model of technical change and trade.Much of the theoretical work to date relies on diagrams and/or special assumptions (such as Leontief production technology).Our formal model has the advantage of greater generality and relates an open-economy multi-sector model familiar to trade economists to the partial-equilibrium one-sector model familiar to labor economists.With this model we try to reconcile various findings in the current theoretical literature.Our key theoretical result we label the "sector-bias hypothesis."In many cases it is the sector bias of technical change, rather than the factor bias, that determines tc's effect on relative factor prices.That is, in many cases rising (falling) skill premia are caused by tc that is concentrated in the skilled-labor-intensive (unskilled-labor-intensive) sectors.We demonstrate 1 For example, Richardson (1995, p. 41) comments that his analysis "undermines research that sweepingly but limply invokes 'technology' (technological karma) for trends in wage inequality.Only some kinds matter.Variable-rate sectoral growth in total factor productivity matters; factor-augmenting technological change does not (for example, computers that make skilled workers even more skilled)."In contrast, Krugman (1995, p. 18) concludes that "Those trade economists who have asserted that factor price trends depend only on the sector of technical change, and not at all on the factor bias of that change, have therefore got it almost exactly the wrong way around."
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