Globalisation, Co-Operation Costs and Wage Inequalities

Abstract

The plummeting cost of international business travel and communication has enabled highly-skilled workers resident in developed countries to become increasingly involved in production in developing countries, where they can co-operate with less-skilled workers whose wages are lower than those of less-skilled workers in developed countries. Reduction of 'co-operation costs' thus has a double effect on wage inequalities. It narrows the gap between developed and developing countries in the wages of less-skilled workers, but in most cases widens the wage gap within developed countries between highly-skilled and less-skilled workers.

JEL Classification: F16, F23, J31