Globalization and wage polarization

Cozzi, Guido and Impullitti, Giammario (2015) Globalization and wage polarization. Review of Economics and Statistics . ISSN 1530-9142

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In the 1980s and 1990s, the US labour market experiences a remarkable polarization along with fast technological catch-up, as Europe and Japan improve their global innovation performance. Is foreign technological convergence an important source of wage polarization? To answer this question, we build a multi-country Schumpeterian growth model with heterogeneous workers, endogenous skill formation and occupational choice. We show that convergence produces polarization through business stealing and increasing competition in global innovation races. Quantitative analysis shows that these channels can be important sources of US polarization. Moreover, the model delivers predictions on the US wealth-income ratio consistent with empirical evidence.

Item Type: Article
Keywords: wage polarization, heterogeneous workers, wealth-income ratio, endogenous technical change, international technology competition, personal service sector
Schools/Departments: University of Nottingham UK Campus > Faculty of Social Sciences > School of Economics
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Depositing User: Eprints, Support
Date Deposited: 16 Jun 2016 08:41
Last Modified: 25 Sep 2016 06:18

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