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Trade, Wages and ´Superstars’

Author

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  • Paolo Manasse

    (University of Milan and IGIER)

  • Alessandro Turrini

    (University of Bergamo, CESPRI, Centro Studi Luca d´Agliano)

Abstract

We study the effect “globalization” on wage inequality. Our “global” economy resembles Rosen (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 cost fall, income is redistributed away from the non-exporting to the exporting sector of the economy. As the latter turns out to employ workers of higher skill and pay, the effect is to raise wage inequality. Whether the least skilled are stand to lose or gain from improved production or communication technologies, in contrast, depends on whether technology is skill-complement or substitute. The model provides an intuitive explanation for why changes in wage premia are so strongly affected by export’ growth in plant-level empirical investigations (Bernard and Jensen (1997)).

Suggested Citation

  • Paolo Manasse & Alessandro Turrini, 1999. "Trade, Wages and ´Superstars’," Development Working Papers 127, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:127
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    File URL: http://www.dagliano.unimi.it/media/WP1999_127.pdf
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    References listed on IDEAS

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    1. Giovanni Maggi & Gene M. Grossman, 2000. "Diversity and Trade," American Economic Review, American Economic Association, vol. 90(5), pages 1255-1275, December.
    2. 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.
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    5. 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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    12. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
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    More about this item

    Keywords

    International trade; wage inequality; technological change;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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