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

  • Hans Fehr
  • Sabine Jokisch
  • Laurence J. Kotlikoff

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 FIW in its series FIW Working Paper series with number 022.

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Length: 40
Date of creation: Jan 2009
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Handle: RePEc:wsr:wpaper:y:2009:i:022
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