Managerial versus Production Wages: Offshoring, Country Size and Endowments

37 Pages Posted: 12 Jan 2011

See all articles by Sebastian Benz

Sebastian Benz

Organization for Economic Co-Operation and Development (OECD)

Wilhelm Kohler

University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 30, 2010

Abstract

In this paper, we explore the role of trade in differentiated final goods as well offshoring of tasks for inequality both within and between countries. We emphasize the distinction between managerial and production labor. Production labor is assumed to be a variable input composed of tradable tasks, while managerial labor is a fixed, non-tradable input. We use a 2-country model recently developed by Grossman & Rossi-Hansberg (2010b) that highlights trade in production task, driven by Marshallian economies of scale. We analyze country size and relative endowment effects on the managerial wage premium as well as on international inequality measured in income per head. We compare these effects in a world where trade is restricted to differentiated final goods with a world with trade in both final goods and production tasks.

Keywords: offshoring, economies of scale, income distribution, international inequality

JEL Classification: F12, F16, F23

Suggested Citation

Benz, Sebastian and Kohler, Wilhelm K., Managerial versus Production Wages: Offshoring, Country Size and Endowments (December 30, 2010). CESifo Working Paper Series No. 3292, Available at SSRN: https://ssrn.com/abstract=1738172 or http://dx.doi.org/10.2139/ssrn.1738172

Sebastian Benz

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Wilhelm K. Kohler (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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