The International Economy
Online ISSN : 1884-4367
Print ISSN : 2186-6074
ISSN-L : 1884-4367
Special Issue in Memory of Michihiro Ohyama and Makoto Ikema
Vertical Specialization and Wage Inequality: A Simple Model of Monopolistic Competition
Morihiro Yomogida
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2020 Volume 23 Pages 182-194


We analyze the relationship between vertical specialization and skilled-unskilled wage inequality by using a monopolistic competition model in which firms can disintegrate their production activities between countries. We develop a new diagrammatic exposition to show that vertical specialization arises, i.e., a country produces final goods by using domestic labor with imported inputs and exports final goods abroad. We show that a country with a larger share of vertical specialization has greater wage inequality.

JEL Classification: F11; F12; F23

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© 2020 The Japan Society of International Economics
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