Globalisation and Wage Differentials: A Spatial Analysis

The Manchester SchoolThe Manchester School, Special Issue: Regional and Spatial Economics, Volume 79, Issue 5, pages 1018–1034, September 2011, Published online 25 August 2011

Bernard Fingleton and Michelle Catherine Baddeley

“Fujita, Krugman and Venables (FKV) develop a model in which international wage differentials encourage industrial mobility. We argue that globalization has another important dimension. Shocks may originate in a single country but, with modern transportation and telecommunications media, shocks spread quickly and with multiple shocks complex spillovers will be generated. We assess these forces in an analysis of international wage convergence, identifying a non-linear relationship and showing that not all countries converge. Given that the FKV model omits many of the causes of non-convergence, our evidence further demonstrates that the FKV model could usefully be extended.”