IDEAS home Printed from https://ideas.repec.org/p/wsr/wpaper/y2009i022.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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.

Suggested Citation

  • Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2009. "Dynamic Globalization and its Potentially Alarming Prospects for Low-Wage Workers," FIW Working Paper series 022, FIW.
    • Handle: RePEc:wsr:wpaper:y:2009:i:022
    as

    Download full text from publisher

    File URL: http://www.fiw.ac.at/fileadmin/Documents/Publikationen/Working_Paper/N_022-FehrJokischKotlikoff.pdf
    File Function: full text
    Download Restriction: none
    ---><---

    References listed on IDEAS

    as
    1. 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, President and Fellows of Harvard College, vol. 114(3), pages 907-940.
    2. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.
    3. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-245, May.
    4. Zvi Eckstein & Eva Nagypal, 2004. "The evolution of U.S. earnings inequality: 1961?2002," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 28(Dec), pages 10-29.
    5. 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.
    6. Wood, Adrian, 1998. "Globalisation and the Rise in Labour Market Inequalities," Economic Journal, Royal Economic Society, vol. 108(450), pages 1463-1482, September.
    7. 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 234-239, May.
    8. Takatoshi Ito & Andrew K. Rose, 2007. "Fiscal Policy and Management in East Asia," NBER Books, National Bureau of Economic Research, Inc, number ito_07-1, June.
    9. 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 371-392, June.
    10. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
    11. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
    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. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.
    14. 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.
    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. 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, pages 133-193, National Bureau of Economic Research, Inc.
    17. 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, April.
    18. 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(1), pages 53-75, March.
    19. repec:pri:cepsud:113krusell is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. George Kudrna & John Piggott & Phitawat Poonpolkul, 2022. "Extending Pension Policy in Emerging Asia: An Overlapping-Generations Model Analysis for Indonesia," PIER Discussion Papers 171, Puey Ungphakorn Institute for Economic Research.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2008. "Dynamic Globalization and Its Potentially Alarming Prospects for Low-Wage Workers," NBER Working Papers 14527, National Bureau of Economic Research, Inc.
    2. Fehr, Hans & Jokisch, Sabine & Kotlikoff, Laurence J., 2013. "The world’s interconnected demographic/fiscal transition," The Journal of the Economics of Ageing, Elsevier, vol. 1, pages 35-49.
    3. Monte, Ferdinando, 2011. "Skill bias, trade, and wage dispersion," Journal of International Economics, Elsevier, vol. 83(2), pages 202-218, March.
    4. Lee, Donghoon & Wolpin, Kenneth I., 2010. "Accounting for wage and employment changes in the US from 1968-2000: A dynamic model of labor market equilibrium," Journal of Econometrics, Elsevier, vol. 156(1), pages 68-85, May.
    5. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
    6. Ariell Reshef, 2013. "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 312-331, April.
    7. Fehr, Hans & Jokisch, Sabine & Kallweit, Manuel & Kindermann, Fabian & Kotlikoff, Laurence J., 2013. "Generational Policy and Aging in Closed and Open Dynamic General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1719-1800, Elsevier.
    8. Nico Voigtlaender, 2009. "Many Sectors Meet More Skills: Intersectoral Linkages and the Skill Bias of Technology," 2009 Meeting Papers 1136, Society for Economic Dynamics.
    9. David Hémous & Morten Olsen, 2022. "The Rise of the Machines: Automation, Horizontal Innovation, and Income Inequality," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 179-223, January.
    10. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U. S. Wage Inequality: Re-Assessing the Revisionists," Harvard Institute of Economic Research Working Papers 2095, Harvard - Institute of Economic Research.
    11. David B. Audretsch & Mark Sanders, 2007. "Globalization and the Rise of the Entrepreneurial Economy," Jena Economics Research Papers 2007-003, Friedrich-Schiller-University Jena.
    12. Seth G. Benzell & Eugene Goryunov & Maria Kazakova & Laurence J. Kotlikoff & Guillermo LaGarda & Kristina Nesterova & Andrey Zubarev, 2015. "Simulating Russia’s and Other Large Economies’ Challenging and Interconnected Transitions," NBER Working Papers 21269, National Bureau of Economic Research, Inc.
    13. Cheng, Cheng & Wang, Xiaobing, 2021. "Transportation cost reducing technological change and wages inequalities," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 600-611.
    14. Knoblach, Michael, 2019. "Skill-biased technological change, endogenous labor supply, and the skill premium," CEPIE Working Papers 03/19, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    15. Zeynep Elitas & Hakan Ercan & Semih Tumen, 2015. "Reassessing the trends in the relative supply of college-equivalent workers in the U.S.: a selection-correction approach," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(2), pages 249-273, June.
    16. Stephen Machin & John Van Reenen, 2007. "Changes in Wage Inequality," CEP Reports 18, Centre for Economic Performance, LSE.
    17. Gordon, Robert J. & Dew-Becker, Ian, 2008. "Controversies about the Rise in American Inequality: A Survey," CEPR Discussion Papers 6817, C.E.P.R. Discussion Papers.
    18. Morin, Annaïg, 2019. "Wage dispersion over the business cycle," Economics Letters, Elsevier, vol. 181(C), pages 17-21.
    19. Capatina, Elena, 2014. "Skills and the evolution of wage inequality," Labour Economics, Elsevier, vol. 28(C), pages 41-57.
    20. Rosario Crinò, 2009. "Offshoring, Multinationals And Labour Market: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(2), pages 197-249, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsr:wpaper:y:2009:i:022. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.