Tagged: Wages

Co-location and Spatial Wage Spillovers in China: The Role of Foreign Ownership and Trade

This paper examines how wages in China are influenced by the interaction and co-location of firms across geographical space. Specifically, and with an emphasis on globally engaged firms and China’s uneven growth across regions we use a spatial econometric approach to estimate the direct and indirect impact of foreign-ownership and export participation on wages. Spatial Durbin Model results reveal an indirect effect of foreign-ownership and exporting on the compensation of workers in co-located firms as well as evidence in support of the standard direct effect that foreign firms, exporters, and firms with a highly educated workforce pay higher wages.

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Union wage-setting and international trade with footloose capital

This paper sets up a general oligopolistic equilibrium model with two countries that differ in the centralization of union wage-setting. Being interested in the consequences of openness, we show that, in the short run, trade increases welfare and employment in both locations, and it raises income of capital owners as well as workers. In the long run, capital outflows from the country with the more centralized wage-setting generate winners and losers and make the two countries more dissimilar in terms of unemployment or welfare. Decentralization of wage-setting can successfully prevent capital outflow and the export of jobs.

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Globalisation and Inter-occupational Inequality: Empirical Evidence from OECD Countries / Arne Bigsten, Farzana Munshi

How does globalisation affect inter-occupational wage inequality within countries? This paper examines this by focusing on two dimensions of globalisation: openness to trade and openness to capital flows, using a relatively new data set on occupational wages. Estimates from a dynamic model for 15 OECD countries spanning the period 1983–2003 suggest that increased openness increases occupational wage inequality in poorer OECD countries as predicted by the Heckscher–Ohlin–Samuelson model, but for the more advanced OECD countries, we find no significant effect. The absence of the expected result for the latter category can be due to a rapid increase in the supply of skilled labour, to outsourcing of skilled jobs or because changes in the trade flows are too small to have any significant effect in those countries.

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Trade liberalisation and manufacturing wage premiums: Evidence from Thailand / Kankesu Jayanthakumaran, Piyapong Sangkaew, Martin O’Brien

This paper investigates trade related industrial wage premiums. The procedure involves (1) estimating industrial wage premiums and (2) linking those estimated wage premiums to trade related variables. Results reveal that (1) in addition to workers’ characteristics, industry characteristics where workers are employed were important in determining the wages for workers, (2) falling output tariffs resulted in increased wage premiums, and (3) an increase in intermediate imports exerted a strong positive influence on wage premiums. Linked employer and employee micro data may provide further insights which are currently not available.

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Globalization, Trade, and Wages: what does history tell us about China?

Newly assembled data show that, as China opened up to global trade during the early 20th century, its exports became more unskilled-intensive and its imports more skill-intensive. Difference-in-differences estimates show that World War I dramatically increased Chinese exports, raising the relative demand for the unskilled workers producing them. When the war ended, trade costs declined and China’s terms of trade increased, further stimulating exports. A simulation of a dynamic general equilibrium model demonstrates that the effects of the war on China’s terms of trade produces a decline in the skill premium similar to what China experienced in the 1920s.

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