Managerial versus Production Wages: Offshoring, Country Size, and Endowments

Managerial versus Production Wages: Offshoring, Country Size, and Endowments

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Article ID: iaor201521973
Volume: 47
Issue: 1
Start Page Number: 250
End Page Number: 271
Publication Date: Feb 2014
Journal: Canadian Journal of Economics/Revue canadienne d'conomique
Authors: ,
Keywords: economics
Abstract:

We explore the role of trade in differentiated final goods as well as offshoring of tasks for inequality both within and between countries, emphasizing the distinction between managerial and production labour. We extend Grossman and Rossi‐Hansberg (2012), where task trade is driven by external economies of scale, by considering asymmetric endowments. Identifying possible equilibrium patterns of task trade, we find little scope for two‐way trade if endowments are asymmetric. Our numerical simulations identify non‐monotonicities between the level of offshoring and measures of within‐country as well as between‐country inequality.

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