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Dynamic Globalization and Its Potentially Alarming Prospects for Low-Wage Workers

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  • Hans Fehr
  • Sabine Jokisch
  • Laurence J. Kotlikoff

Abstract

Will incomes of low and high skilled workers continue to diverge? Yes says our paper's dynamic, six-good, five-region -- U.S., Europe, N.E. Asia (Japan, Korea, Taiwan, Hong Kong), China, and India -- general equilibrium, life-cycle model. The model predicts a near doubling of the ratio of high- to low-skilled wages over the century. Increasing wage inequality arises from a traditional source -- a rising worldwide relative supply of unskilled labor, reflecting Chinese and Indian productivity improvements. But China's and India's education policies matter. If successive Chinese and Indian cohorts become more skilled, major exacerbation of inequality will be precluded.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14527.

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Date of creation: Dec 2008
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Handle: RePEc:nbr:nberwo:14527
Note: AG DAE ITI LE ME PE PR
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Find related papers by JEL classification:
  • F0 - International Economics - - General
  • F20 - International Economics - - International Factor Movements and International Business - - - General
  • H0 - Public Economics - - General
  • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
  • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
  • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
  • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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  1. Robert Z. Lawrence, 2008. "Blue-Collar Blues: Is Trade to Blame for Rising US Income Inequality?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa85.
  2. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc.
  3. Zvi Eckstein & Éva Nagypál, 2004. "The evolution of U.S. earnings inequality: 1961?2002," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Dec, pages 10-29.
  4. Sachs, Jeffrey D & Shatz, Howard J, 1996. "U.S. Trade with Developing Countries and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 234-39, May.
  5. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
  6. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  7. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
  8. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 907-940.
  9. James, Estelle, 2002. "How can China solve its old-age security problem? The interaction between pension, state enterprise and financial market reform," Journal of Pension Economics and Finance, Cambridge University Press, vol. 1(01), pages 53-75, March.
  10. Takatoshi Ito & Andrew K. Rose, 2007. "Fiscal Policy and Management in East Asia, NBER-EASE, Volume 16," NBER Books, National Bureau of Economic Research, Inc, number ito_07-1, September.
  11. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2007. "Will China Eat Our Lunch or Take Us to Dinner? Simulating the Transition Paths of the United States, the European Union, Japan, and China," NBER Chapters, in: Fiscal Policy and Management in East Asia, NBER-EASE, Volume 16, pages 133-193 National Bureau of Economic Research, Inc.
  12. Kotlikoff, Laurence J. & Smetters, Kent & Walliser, Jan, 2007. "Mitigating America's demographic dilemma by pre-funding social security," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 247-266, March.
  13. Barry Bosworth & Susan M. Collins, 2007. "Accounting for Growth: Comparing China and India," NBER Working Papers 12943, National Bureau of Economic Research, Inc.
  14. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
  15. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  16. Wood, Adrian, 1998. "Globalisation and the Rise in Labour Market Inequalities," Economic Journal, Royal Economic Society, vol. 108(450), pages 1463-82, September.
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Cited by:

  1. Siliverstovs, Boriss & Kholodilin, Konstantin A. & Thiessen, Ulrich, 2011. "Does aging influence structural change? Evidence from panel data," Economic Systems, Elsevier, vol. 35(2), pages 244-260, June.
  2. Hans Fehr & Sabine Jokisch & Ashwin Kambhampati & Laurence J. Kotlikoff, 2013. "Simulating the Elimination of the U.S. Corporate Income Tax," NBER Working Papers 19757, National Bureau of Economic Research, Inc.
  3. Robert Z. Lawrence, 2013. "Association of Southeast Asian Nations, People's Republic of China, and India Growth and the Rest of the World : The Role of Trade," Trade Working Papers 23409, East Asian Bureau of Economic Research.
  4. Seth G. Benzell & Eugene Goryunov & Maria Kazakova & Guillermo Lagarda & Kristina Nesterova & Laurence J. Kotlikoff, . "Simulating Russia’s and Other Large Economies’ Challenging and Interconnected Transitions," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-274, Boston University - Department of Economics.
  5. Laurence Kotlikoff, 2013. "The US Fiscal Cliff – When Economists Recklessly Endanger the Economy," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(2), pages 03-08, 08.
  6. Benzell, Seth G. & Goryunov, Eugene & Kazakova, Marija & Kotlikoff, Laurence J. & LaGarda, Guillermo & Nesterova, Kristina & Zubarev, Andrey, 2015. "Simulating Russia’S And Other Large Economies’ Challenging And Interconnected Transitions," EconStor Preprints 121939, ZBW - German National Library of Economics.

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