KCG Seminar on Impact of Globalization on Wage Inequality on Feb. 27, 2020

Globalization has rapidly intensified over the last few decades. Continuously expanding global value chains foster global economic integration and enable individuals and firms in not only developed but also emerging and developing countries to better participate in global economic exchanges.

While greater international specialization is commonly viewed as raising economic prosperity, even those in favour of globalization would concede that it not only creates winners, but also losers and has unintended adverse side-effects. One key aspect here is related to the development of wage inequality with increasing globalization.

Against this background, Prof. Sarah Schroeder, Ph.D. (Aarhus University) will give a KCG Lunch-Time Seminar titled “Exporters, Multinationals and Residual Wage Inequality: Evidence and Theory” this Thursday at the Kiel Institute for the World Economy.

Abstract: This paper studies the implications for wage inequality of two distinct forms of globalization, namely trade and foreign direct investment (FDI).  I use German linked employer-employee data to (1) jointly estimate the exporter and the multinational wage premium and (2) to further distinguish between wage premia of multinational firms that are foreign owned (inward FDI) and domestically owned (outward FDI). My findings exhibit a clear hierarchy of firms’ international  activities  with  regard  to  wage  premia  and  workforce  ability.  I  interpret  these patterns  using  a  theoretical  framework,  which  incorporates  ex-ante  homogeneous  workers, heterogeneous  firms  and  search  and  matching  frictions  into  a  multi-region  model  of  trade and FDI with monopolistic competition. The model allows me to account for the observed empirical patterns, and delivers novel insights about the interplay between trade, FDI and labour market institutions.

The Seminar will take place on Feb. 27, 2020 (12:00 – 13:00) in the Medienraum at the Kiel Institute (Kiellinie 66, 24105 Kiel, Germany).