Trade, Wages, and Superstars
We study the effect of 'globalization' on wage inequality. Our 'global' economy resembles Rosen's (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 costs fall, income is redistributed away from the non-exporting to the exporting sector of the economy. As the former turns out to employ workers of higher skill and pay, the effect is to raise wage inequality. Whether the least skilled stand to lose or gain from improved production or communication technologies, in contrast, depends on whether technology is skill-complementary, or a substitute. The model gives an intuitive explanation for the empirical regularities that skill intensity, market size and wages tend to be positively associated with exporting activity across sectors and plants.
|Date of creation:||Oct 1999|
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- 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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"Exporters, skill upgrading, and the wage gap,"
Journal of International Economics,
Elsevier, vol. 42(1-2), pages 3-31, February.
- Bradford J Jensen & Andrew B Bernard, 1994. "Exporters, Skill Upgrading And The Wage Gap," Working Papers 94-13, Center for Economic Studies, U.S. Census Bureau.
- Bernard, A.B. & Jensen, J.B., 1994. "Exporters, Skill Upgrading, and the Wage Gap," Working papers 94-30, Massachusetts Institute of Technology (MIT), Department of Economics.
- Gene M. Grossman & Giovanni Maggi, 1998.
"Diversity and Trade,"
NBER Working Papers
6741, National Bureau of Economic Research, Inc.
- Bernard, A., 1997.
"Exceptional Exporter Performance: Cause, Effect, or Both?,"
97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
- Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
- S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
- 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.
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"Are CEOs Really Paid Like Bureaucrats?,"
NBER Working Papers
6213, National Bureau of Economic Research, Inc.
- 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.
- Andrew Bernard & Joachim Wagner, 2001.
"Export entry and exit by German firms,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 105-123, March.
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- Phillip Swagel & Matthew J. Slaughter, 1997. "The Effect of Globalization on Wages in the Advanced Economies," IMF Working Papers 97/43, International Monetary Fund.
- Smith, Alasdair & Venables, Anthony J., 1991. "Economic integration and market access," European Economic Review, Elsevier, vol. 35(2-3), pages 388-395, April.
- Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
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