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Fragmentation and Wage Inequality: Insights from a Simple Model

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Listed:
  • Juan Carluccio
  • Ivar Ekeland
  • Roger Guesnerie

Abstract

We develop a simple model to study how globalization affects wage inequalities. The model features three goods, one is an "international" good, and two are local non-tradable goods. The non-tradable goods are produced by local labor, either skilled or unskilled, while labor of all types and all origins contribute to the production of the international good. We find that increasing participation of the South in global production and consumption lead to an increase in wage inequalities in the North. Higher South integration into global value chains reduces North-South wage inequalities.

Suggested Citation

  • Juan Carluccio & Ivar Ekeland & Roger Guesnerie, 2017. "Fragmentation and Wage Inequality: Insights from a Simple Model," Annals of Economics and Statistics, GENES, issue 125-126, pages 113-134.
  • Handle: RePEc:adr:anecst:y:2017:i:125-126:p:113-134
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    File URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.125-126.0113
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    Keywords

    Fragmentation of Production; Globalization; Wage Inequalities;

    JEL classification:

    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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