Working Paper: NBER ID: w17976
Authors: Arnaud Costinot; Jonathan Vogel; Su Wang
Abstract: A salient feature of globalization in recent decades is the emergence of "global supply chains" in which different countries specialize in different stages of a sequential production process. In Arnaud Costinot, Jonathan Vogel and Su Wang (2011), CVW hereafter, we have developed a simple theory of trade with sequential production to shed light on how global supply chains affect the interdependence of nations. In this paper we develop a multi-factor extension of CVW to explore how the emergence of global supply chains may affect wage inequality within countries. Our main theoretical prediction is that the emergence of global supply chains has opposite effects on wage inequality among workers employed at the bottom and the top of these chains. This suggests that the consequences of globalization on wage inequality may be very different in primary sectors like agriculture or mining than in manufacturing sectors.
Keywords: Global Supply Chains; Wage Inequality; Trade; Sequential Production
JEL Codes: F1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| global supply chains (F69) | transition of southern workers into earlier stages of production (P23) |
| transition of southern workers into earlier stages of production (P23) | decreased wage inequality among low-skill southern workers (J79) |
| transition of southern workers into earlier stages of production (P23) | increased wage inequality among high-skill workers (J31) |
| global supply chains (F69) | changes in wage distributions (J31) |
| global supply chains (F69) | opposite effects on wage inequality among workers at the bottom and top of the production chain (J31) |