Skill and foreign firm premium: the role of technology gap and labor cost

Date

2012

Authors

Saglam, B. B.
Sayek, S.

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Abstract

In this chapter, the authors construct a model that allows for joint discussion of foreign firm and skill premium in wages, and their evolution upon increased foreign firm activities. They allow for (1) dynamic interaction between the domestic and foreign firms in the labor market, via a two-sided search model, (2) technology differentials between domestic and foreign firms, and (3) varying cost of doing business between domestic and foreign firms. Analytical and numerical results point to the importance of modeling all three features. Both the level and the changes in the relative wages depend on the productivity differential (technology gap) and the job creation costs. © 2013, IGI Global.

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Industrial Dynamics, Innovation Policy, and Economic Growth through Technological Advancements

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IGI Global

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Published Version (Please cite this version)

Language

English