Department of Economics and Business Economics

Product market integration, rents and wage inequality

Research output: Working paperResearch

Documents

  • Wp10 04

    Final published version, 284 KB, PDF document

  • School of Economics and Management
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.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages25
Publication statusPublished - 2010

    Research areas

  • Trade frictions, relative productivity, rent sharing, job turnover and inequality

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