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Trade, Wages and Superstars

Paolo Manasse and Alessandro Turrini

No 127, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: We study the effect of globalization on wage inequality. Our global economy resembles Rosen (1981) Superstars economy, where a) innovations in production and communication technologies enable suppliers to reach a larger mass of consumers and to improve the (perceived) quality of their products and b) trade barriers fall. When transport cost fall, income is redistributed away from the non-exporting to the exporting sector of the economy. As the latter turns out to employ workers of higher skill and pay, the effect is to raise wage inequality. Whether the least skilled are stand to lose or gain from improved production or communication technologies, in contrast, depends on whether technology is skill-complement or substitute. The model provides an intuitive explanation for why changes in wage premia are so strongly affected by export growth in plant-level empirical investigations (Bernard and Jensen (1997)).

Keywords: International trade; wage inequality; technological change (search for similar items in EconPapers)
JEL-codes: F12 F16 J31 (search for similar items in EconPapers)
Date: 1999-06-01
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Journal Article: Trade, wages, and 'superstars' (2001) Downloads
Working Paper: Trade, Wages, and Superstars (1999) Downloads
Working Paper: Trade, Wages and "Superstars" Downloads
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