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Regional Manufacturing Wages: Dancing to the Tune of Trade Shocks

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  • Filipe Lage de Sousa

Abstract

Firms generally choose to locate their production where profits are maximized. As costs affect profits, trade-offs between two marginal costs - employees' wages and transport costs - may be important for decisions regarding location. Wages tend to be greater in industrial centres and decrease as transport costs increase. Trade shocks might impact regional wage disparities by making foreign markets, for example, relatively more attractive for firms than domestic markets. This paper tests these two hypotheses by using regional Brazilian data. Results corroborate that regions with higher transport costs present lower wages, and that trade shocks affect these regional wage disparities.

Suggested Citation

  • Filipe Lage de Sousa, 2010. "Regional Manufacturing Wages: Dancing to the Tune of Trade Shocks," SERC Discussion Papers 0046, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:sercdp:0046
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    References listed on IDEAS

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    1. André Rodríguez‐Pose & Glauco Arbix, 2001. "Strategies of Waste: Bidding Wars in the Brazilian Automobile Sector," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 25(1), pages 134-154, March.
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    More about this item

    Keywords

    Economic geography; trade shocks; manufacturing wages;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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