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Trade, Wages and Superstars

Author

Listed:
  • Paolo Manasse

    (University of Milan and IGIER)

  • Alessandro Turrini

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

Abstract

We study the effect of 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: https://www.dagliano.unimi.it/media/WP1999_127.pdf
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    Keywords

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    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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