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Disparity in Wages but Not in Returns to Capital between Rich and Poor Countries

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  • Bardhan, Pranab

Abstract

One of the striking features of the international economy is that while the level of average wage rates in rich countries is many times that in poor countries, their average rates of return to capital seem to be roughly similar or the differences in them relatively very small. This cannot be fully explained away by the fact that capital is internationally much more mobile than labor. There is remarkably little movement of return-sensitive private capital between the richest and the poorest countries. In this paper we assume instead that factors of production are internationally immobile, and try to explain the observed asymmetry in the pattern of factor prices in terms of particular types of differences in production functions between rich and poor countries, in terms of differential learning effects and differential degrees of specialization in the sector producing intermediate inputs and services.

Suggested Citation

  • Bardhan, Pranab, 1993. "Disparity in Wages but Not in Returns to Capital between Rich and Poor Countries," Center for International and Development Economics Research (CIDER) Working Papers 233198, University of California-Berkeley, Department of Economics.
  • Handle: RePEc:ags:ucbewp:233198
    DOI: 10.22004/ag.econ.233198
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    References listed on IDEAS

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    1. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
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    Citations

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    Cited by:

    1. Eichengreen, Barry & Tobin, James & Wyplosz, Charles, 1995. "Two Cases for Sand in the Wheels of International Finance," Economic Journal, Royal Economic Society, vol. 105(428), pages 162-172, January.
    2. Frankel, Jeffrey A. & Funke, Norbert, 1994. "A Two-Country Analysis of International Targeting of Nominal GNP," Center for International and Development Economics Research (CIDER) Working Papers 233377, University of California-Berkeley, Department of Economics.
    3. Barry Eichengreen., 1993. "International Monetary Arrangements for the 21st Century," Center for International and Development Economics Research (CIDER) Working Papers C93-021, University of California at Berkeley.
    4. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1994. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," CEPR Discussion Papers 1060, C.E.P.R. Discussion Papers.
    5. Eichengreen, Barry, 1994. "The Bretton Woods System: Paradise Lost?," Center for International and Development Economics Research (CIDER) Working Papers 233394, University of California-Berkeley, Department of Economics.
    6. Klaus Desmet & Felipe Meza & Juan A. Rojas, 2008. "Foreign direct investment and spillovers: gradualism may be better," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 926-953, August.
    7. Jeffrey A. Frankel & Andrew K. Rose, 1994. "A Survey of Empirical Research on Nominal Exchange Rates," NBER Working Papers 4865, National Bureau of Economic Research, Inc.
    8. Barry Eichengreen., 1993. "The Crisis in the EMS and the Transition to EMU: An Interim Assessment," Center for International and Development Economics Research (CIDER) Working Papers C93-022, University of California at Berkeley.
    9. Pranab Bardhan, 1998. "The Contributions of Endogenous Growth Theory to the Analysis of Development Problems: An Assessment," Palgrave Macmillan Books, in: Fabrizio Coricelli & Massimo di Matteo & Frank Hahn (ed.), New Theories in Growth and Development, chapter 5, pages 97-110, Palgrave Macmillan.
    10. Stein, Ernesto H. & Streb, Jorge M., 1998. "Political stabilization cycles in high-inflation economies," Journal of Development Economics, Elsevier, vol. 56(1), pages 159-180, June.
    11. Maurice Obstfeld, 1993. "International Capital Mobility in the 1990s," NBER Working Papers 4534, National Bureau of Economic Research, Inc.
    12. Eichengreen, Barry & Wyplosz, Charles, 1995. "What Do Currency Crises Tell Us About the Future of the International Monetary System?," Center for International and Development Economics Research (CIDER) Working Papers 233418, University of California-Berkeley, Department of Economics.
    13. Frankel, Jeffrey & Wyplosz, Charles, 1995. "A Proposal to Introduce the ECU First in the East," Center for International and Development Economics Research (CIDER) Working Papers 233415, University of California-Berkeley, Department of Economics.
    14. Eichengreen, Barry, 1993. "Thinking about Migration: Notes on European Migration Pressures at the Dawn of the Next Millennium," Center for International and Development Economics Research (CIDER) Working Papers 233200, University of California-Berkeley, Department of Economics.
    15. Eichengreen, Barry & Flandreau, Marc, 1994. "The Geography of the Gold Standard," Center for International and Development Economics Research (CIDER) Working Papers 233393, University of California-Berkeley, Department of Economics.
    16. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "A panel project on purchasing power parity: Mean reversion within and between countries," Journal of International Economics, Elsevier, vol. 40(1-2), pages 209-224, February.
    17. Jeffrey A. Frankel, 1993. "Monetary regime choices for a semi-open country," Pacific Basin Working Paper Series 93-02, Federal Reserve Bank of San Francisco.
    18. Jeffrey A. Frankel and Shang-Jin Wei., 1993. "Emerging Currency Blocs," Center for International and Development Economics Research (CIDER) Working Papers C93-026, University of California at Berkeley.
    19. Feeney, JoAnne, 1999. "International risk sharing, learning by doing, and growth," Journal of Development Economics, Elsevier, vol. 58(2), pages 297-318, April.
    20. James H. Anderson, 2002. "The Distribution Sector and the Development Process: are there Patterns? Yes," Economic Inquiry, Western Economic Association International, vol. 40(2), pages 166-176, April.
    21. Barry Eichengreen., 1993. "Prerequisites for International Monetary Stability," Center for International and Development Economics Research (CIDER) Working Papers C93-018, University of California at Berkeley.
    22. Eichengreen, Barry, 1995. "Sterling in Decline Again: The 1931 and 1992 Crises Compared," Center for International and Development Economics Research (CIDER) Working Papers 233404, University of California-Berkeley, Department of Economics.
    23. Barry Eichengreen., 1994. "Deja Vu All Over Again: Lessons from the Gold Standard for European Monetary Unification," Center for International and Development Economics Research (CIDER) Working Papers C94-032, University of California at Berkeley.
    24. Barry Eichengreen and Beth Simmons., 1993. "International Economics and Domestic Politics: Notes on the 1920s," Center for International and Development Economics Research (CIDER) Working Papers C93-029, University of California at Berkeley.

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    More about this item

    Keywords

    International Development;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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