Hitotsubashi Trade/Urban Economics Workshop – Naoki Tani (Kyoto University / Ministry of Finance)

2025/09/25

September 25 (Thr) Naoki Tani (Kyoto University / Ministry of Finance) 17:10–18:40, Place: IER Conference room

Title: Quantifying the causes of between-industry wage inequality and the skill premium in a global economy

Abstract: This study investigates the rationale for why between-industry wage inequality increased globally from 1995 to 2006 while the skill premium only increased in some countries. This is because of substantial differences in the relative importance of different factors driving the between-industry wage inequality and skill premium. We develop a quantitative general equilibrium model of firms’ offshoring to answer this question. Our model incorporates heterogeneous labor and firm, sector-country-specific skill intensity, and sectoral preference weights by country to analyze the effects of skill-biased technological change, trade liberalization, skilled-labor supply, and consumers’ preference shift on the change in inequality of each country. We apply our model to 24 sectors in 10 countries. The model predictions are consistent with the observed change in between-industry wage disparity and skill premium. The shift in consumers’ sectoral preference to the skill-intensive sectors, skill-biased technological change, and skilled-labor supply are the main factors which increase the skill premium. Meanwhile, between-industry wage inequality is almost exclusively attributable to the skill-biased technological change.