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Globalization, co-operation costs, and wage inequalities

Edward Anderson (), Paul J. G. Tang and Adrian Wood

Oxford Economic Papers, 2006, vol. 58, issue 4, 569-595

Abstract: The falling cost of international business travel and communication motivates highly-skilled workers who live in developed countries to spend more of their time co-operating with less-skilled workers in developing countries. This tends to narrow the gap between developed and developing countries in the wages of less-skilled workers, but to widen the wage gap within developed countries between highly-skilled and less-skilled workers. The paper formalizes this mechanism and tests it on data for the United States and developing countries. The two effects on wage inequalities of greater co-operation of highly-skilled workers with workers in developing countries both seem quantitatively important. Copyright 2006, Oxford University Press.

Date: 2006
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