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Global Supply Chains and Wage Inequality

  • Arnaud Costinot
  • Jonathan Vogel
  • Su Wang

A salient feature of globalization in recent decades is the emergence of "global supply chains" in which different countries specialize in different stages of a sequential production process. In Arnaud Costinot, Jonathan Vogel and Su Wang (2011), CVW hereafter, we have developed a simple theory of trade with sequential production to shed light on how global supply chains affect the interdependence of nations. In this paper we develop a multi-factor extension of CVW to explore how the emergence of global supply chains may affect wage inequality within countries. Our main theoretical prediction is that the emergence of global supply chains has opposite effects on wage inequality among workers employed at the bottom and the top of these chains. This suggests that the consequences of globalization on wage inequality may be very different in primary sectors like agriculture or mining than in manufacturing sectors.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17976.

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Date of creation: Apr 2012
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Publication status: published as Arnaud Costinot & Jonathan Vogel & Su Wang, 2012. "Global Supply Chains and Wage Inequality," American Economic Review, American Economic Association, vol. 102(3), pages 396-401, May.
Handle: RePEc:nbr:nberwo:17976
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  1. Jonathan Vogel & Arnaud Costinot, 2008. "Matching and Inequality in the World Economy," 2008 Meeting Papers 879, Society for Economic Dynamics.
  2. Su Wang & Jonathan Vogel & Arnaud Costinot, 2011. "An Elementary Theory of Global Supply Chains," 2011 Meeting Papers 95, Society for Economic Dynamics.
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