This paper analyzes the effect of trade on growth, when technology adoption is endogenous and depends on factor prices. It shows that trade can lead to an increase in income disparities across countries. Namely, the rich countries grow much faster than the poor countries. This is due to specialization of richer countries in more skilled goods, which experience more technical change, while poor countries specialize in unskilled goods, which experience less technical change. Due to lack of sufficient labor mobility between the two blocks of countries wage gaps do not narrow.
JEL: O11, O14, O30, O40.
Keywords: Globalization, Technology Adoption, Human Capital.

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