Explaining the Wage Gap: Heckscher-Ohlin, Economic Geography and Services Availability
Groningen : Research School Systems, Organisation and Management
SOM Research Reports ; 00C21
Number of pages
44 + bijlagen p.
External research report
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Vakgr. Toegepaste Economie
SubjectInternationalisering van Europa
In the debate on globalisation and wage inequality HeckscherOhlin theory has featured prominently. However, a neglected mechanism by which globalisation affects labour market outcomes is through the increased tradability of producer services. By integrating elements of Heckscher-Ohlin theory, the economic geography literature and the literature on producer services linkages, we show that the impact of globalisation on the relative wages is a sophisticated combination of the effects that play a key-role in these models. The most important result we find is that the fall in transportation costs of producer services might indeed have caused the sharp increase in wage inequality.
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