Product market integration, rents and wage inequality

Torben M. Andersen () and Allan Sørensen
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Torben M. Andersen: School of Economics and Management, Aarhus University, Denmark, Postal: 8000 Aarhus C, Denmark

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: Globalization in the form of product market integration affects labour markets and produces winners and losers. While there are aggregate gains, it is in general ambiguous how inequality is affected. We explore this issue in a Ricardian model and show that it depends on the balance between "protection" and "specialization" rents. In particular, wage inequality among similar workers (residual wage inequality) may be U-shaped, at first decreasing and then increasing in the process of product market integration. Consequently, there may be gains in both the efficiency and the equity dimension until integration reaches a certain level at which a trade-off arises.

Keywords: Trade frictions; relative productivity; rent sharing; job turnover and inequality (search for similar items in EconPapers)
JEL-codes: F15 F16 J39 J50 J63 (search for similar items in EconPapers)
Pages: 25
Date: 2010-04-09
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https://repec.econ.au.dk/repec/afn/wp/10/wp10_04.pdf (application/pdf)

Related works:
Journal Article: Product Market Integration, Rents and Wage Inequality (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2010-04

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