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Managerial versus Production Wages: Offshoring, Country Size and Endowments

  • Sebastian Benz

    ()

  • Wilhelm Kohler

In this paper, we explore the role of trade in differentiated final goods as well offshoring of tasks for inequality both within and between countries. We emphasize the distinction between managerial and production labor. Production labor is assumed to be a variable input composed of tradable tasks, while managerial labor is a fixed, non-tradable input. We use a 2-country model recently developed by Grossman & Rossi-Hansberg (2010b) that highlights trade in production task, driven by Marshallian economies of scale. We analyze country size and relative endowment effects on the managerial wage premium as well as on international inequality measured in income per head. We compare these effects in a world where trade is restricted to differentiated final goods with a world with trade in both final goods and production tasks.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-12/cesifo1_wp3292.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3292.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3292
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  1. Egger, Hartmut & Kreickemeier, Udo, 2012. "Fairness, trade, and inequality," Journal of International Economics, Elsevier, vol. 86(2), pages 184-196.
  2. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
  3. Paolo Manasse & Alessandro Turrini, 1999. "Trade, Wages and ´Superstars’," Development Working Papers 127, Centro Studi Luca d\'Agliano, University of Milano.
  4. Grossman, Gene M. & Rossi-Hansberg, Esteban, 2011. "Task trade between similar countries," Policy Research Working Paper Series 5819, The World Bank.
  5. Antras, Pol & Helpman, Elhanan, 2004. "Global Sourcing," Scholarly Articles 3196327, Harvard University Department of Economics.
  6. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  7. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, 07.
  8. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  9. Udo Kreickemeier, 2009. "Trade, technology, and unemployment: the role of endogenous skill formation," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 639-664, May.
  10. Horn, Henrik, 1983. "Some implications of non-homotheticity in production in a two-sector general equilibrium model with monopolistic competition," Journal of International Economics, Elsevier, vol. 14(1-2), pages 85-101, February.
  11. Ethier, Wilfred, 1979. "Internationally decreasing costs and world trade," Journal of International Economics, Elsevier, vol. 9(1), pages 1-24, February.
  12. Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. repec:hrv:faseco:4784029 is not listed on IDEAS
  14. Zhu, Susan Chun & Trefler, Daniel, 2005. "Trade and inequality in developing countries: a general equilibrium analysis," Journal of International Economics, Elsevier, vol. 65(1), pages 21-48, January.
  15. Gene M. Grossman & Esteban Rossi-Hansberg, 2010. "External Economies and International Trade Redux," The Quarterly Journal of Economics, MIT Press, vol. 125(2), pages 829-858, May.
  16. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  17. Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 957-78, December.
  18. Paul Krugman, 1995. "Technology, Trade, and Factor Prices," NBER Working Papers 5355, National Bureau of Economic Research, Inc.
  19. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages C166-C185, 03.
  20. Anas, Alex, 2001. "By Alex Anas. Forthcoming in Regional Science and Urban Economics. The Spatial Economy: Cities, Regions, and International Trade, Masahisa Fujita, Paul Krugman and Anthony J. Venables, MIT Press, Camb," Regional Science and Urban Economics, Elsevier, vol. 31(5), pages 601-615, September.
  21. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
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