A Theoretical Study on the Effect of Trade Liberalization on Technology Upgrading and Skilled Labor Demand of Heterogeneous Firms

This document constructs a partial equilibrium model to analyze the effect of trade liberalization on the technology upgrading and skilled labor demand of heterogeneous firms in the industry. The conclusion indicates that after the trade liberalization, not all firms in the industry achieve technology upgrading. And the effect of trade liberalization on strategies of firms depends on the relative fixed cost of export, degree of trade liberalization and productivity of heterogeneous firm. Generally speaking, trade liberalization is more likely to make firm with high productivity and has already served foreign market achieve technology upgrading and increase the demand for skilled labor.