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Trade, Wages and ´Superstars’

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  • Paolo Manasse

    (University of Milan and IGIER)

  • Alessandro Turrini

    (University of Bergamo, CESPRI, Centro Studi Luca d´Agliano)

Abstract

We study the effect “globalization” on wage inequality. Our “global” economy resembles Rosen (1981) “Superstars” economy, where a) innovations in production and communication technologies enable suppliers to reach a larger mass of consumers and to improve the (perceived) quality of their products and b) trade barriers fall. When transport cost fall, income is redistributed away from the non-exporting to the exporting sector of the economy. As the latter turns out to employ workers of higher skill and pay, the effect is to raise wage inequality. Whether the least skilled are stand to lose or gain from improved production or communication technologies, in contrast, depends on whether technology is skill-complement or substitute. The model provides an intuitive explanation for why changes in wage premia are so strongly affected by export’ growth in plant-level empirical investigations (Bernard and Jensen (1997)).

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 127.

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Date of creation: 01 Jun 1999
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Handle: RePEc:csl:devewp:127

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Keywords: International trade; wage inequality; technological change;

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References

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  1. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, vol. 42(1-2), pages 3-31, February.
  2. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Giovanni Maggi & Gene M. Grossman, 2000. "Diversity and Trade," American Economic Review, American Economic Association, vol. 90(5), pages 1255-1275, December.
  4. Andrew B. Bernard & Joachim Wagner, 1998. "Export Entry and Exit by German Firms," NBER Working Papers 6538, National Bureau of Economic Research, Inc.
  5. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
  6. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  7. Phillip Swagel & Matthew J. Slaughter, 1997. "The Effect of Globilization on Wages in the Advanced Economies," IMF Working Papers 97/43, International Monetary Fund.
  8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  9. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  10. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  11. Brian J. Hall & Jeffrey B. Liebman, 1998. "Are CEOs Really Paid Like Bureaucrats?," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 653-691, August.
  12. Smith, Alasdair & Venables, Anthony J., 1991. "Economic integration and market access," European Economic Review, Elsevier, vol. 35(2-3), pages 388-395, April.
  13. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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