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Trade, Wages and "Superstars"

  • Paolo Manasse
  • Alessandro Turrini

We study the effects ''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 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 are stand to lose or gain from improved production or communication technologies, in contrast, depends on wether technology is skill-complement or substitute. The model gives an intuitive explanation for the empirical regularities that skill intensity, market size and wages tend to be positively associated to exporting activity, across sectors and plants.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 140.

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Handle: RePEc:igi:igierp:140
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  1. 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.
  2. 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.
  3. Brian J. Hall & Jeffrey B. Liebman, 1997. "Are CEOs Really Paid Like Bureaucrats?," NBER Working Papers 6213, National Bureau of Economic Research, Inc.
  4. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
  5. 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.
  6. Phillip Swagel & Matthew J. Slaughter, 1997. "The Effect of Globilizationon Wages in the Advanced Economies," IMF Working Papers 97/43, International Monetary Fund.
  7. Gene M. Grossman & Giovanni Maggi, 1998. "Diversity and Trade," NBER Working Papers 6741, National Bureau of Economic Research, Inc.
  8. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  9. 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.
  10. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
  11. Andrew B. Bernard & Joachim Wagner, 1998. "Export Entry and Exit by German Firms," NBER Working Papers 6538, National Bureau of Economic Research, Inc.
  12. Smith, Alasdair & Venables, Anthony J., 1991. "Economic integration and market access," European Economic Review, Elsevier, vol. 35(2-3), pages 388-395, April.
  13. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  14. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
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