Abstract
The existing studies have shown that skilled-unskilled wage gap is affected by the size of elasticity of substitution in consumption. This paper focuses on the role of elasticity of substitution in production. By making use of a two-sector general equilibrium model, it is shown the size of elasticity of substitution in production affects the factor inflow induced skilled-unskilled wage gap. However, the size of elasticity of substitution in production does not affect the relationship between biased technological improvement and skilled-unskilled wage gap.