Trade, Wages and ´Superstars’
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)).
|Date of creation:||01 Jun 1999|
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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.
- Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
- Gene M. Grossman & Giovanni Maggi, 1998.
"Diversity and Trade,"
NBER Working Papers
6741, National Bureau of Economic Research, Inc.
- Bradford J Jensen & Andrew B Bernard, 1994.
"Exporters, Skill Upgrading And The Wage Gap,"
94-13, Center for Economic Studies, U.S. Census Bureau.
- Brian J. Hall & Jeffrey B. Liebman, 1997.
"Are CEOs Really Paid Like Bureaucrats?,"
NBER Working Papers
6213, National Bureau of Economic Research, Inc.
- 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.
- 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.
- Smith, Alasdair & Venables, Anthony J., 1991. "Economic integration and market access," European Economic Review, Elsevier, vol. 35(2-3), pages 388-395, April.
- Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
- Andrew Bernard & Joachim Wagner, 2001.
"Export entry and exit by German firms,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 137(1), pages 105-123, March.
- S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
- 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.
- Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
- 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.
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