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Abstract for:

Regional Manufacturing Wages: Dancing to the Tune of Trade Shocks

Filipe Lage  de Sousa,  April 2010
Paper No' SERCDP0046: | Full paper (pdf)
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Keywords: Economic geography; trade shocks, manufacturing wages

JEL Classification: F12; F14; R12

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: SERC Discussion Papers
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Firms generally choose to locate their production where profits are maximized. As costs affect profits, trade-offs between two marginal costs – employees’ wages and transport costs – may be important for decisions regarding location. Wages tend to be greater in industrial centres and decrease as transport costs increase. Trade shocks might impact regional wage disparities by making foreign markets, for example, relatively more attractive for firms than domestic markets. This paper tests these two hypotheses by using regional Brazilian data. Results corroborate that regions with higher transport costs present lower wages, and that trade shocks affect these regional wage disparities.