Product market integration, rents and wage inequality
AbstractGlobalization in the form of product market integration affects labour markets and produces winners and losers. While there are aggregate gains, it is in general ambiguous how inequality is affected. We explore this issue in a Ricardian model and show that it depends on the balance between "protection" and "specialization" rents. In particular, wage inequality among similar workers (residual wage inequality) may be U-shaped, at first decreasing and then increasing in the process of product market integration. Consequently, there may be gains in both the efficiency and the equity dimension until integration reaches a certain level at which a trade-off arises.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2010-04.
Date of creation: 09 Apr 2010
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Web page: http://www.econ.au.dk/afn/
Trade frictions; relative productivity; rent sharing; job turnover and inequality;
Other versions of this item:
- Torben M. Andersen & Allan Sørensen, 2011. "Product Market Integration, Rents and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 595-608, 09.
- F15 - International Economics - - Trade - - - Economic Integration
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
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