APL (Ajiken Power Lunch)

Thursday, 8th of May, 12:00 to 1:15 p.m.

IDE-JETRO C22 Meeting Room 　

This paper presents two key insights: (i) regions with relatively greater demand for sectors with low trade costs exhibit higher wage levels, holding other things constant; and (ii) high-wage regions specialize in sectors with high trade costs, as firms facing lower transport costs locate in lower-wage regions to reduce production costs and remain competitive in international markets. The paper quantifies the implications of recent declines in trade costs for modern services, suggesting these changes may reinforce global income divergence, as predicted by the theory. Preliminary estimates using OECD ICIO data point to potential distributional impacts of uneven globalization, with patterns of divergence between advanced economies and emerging markets. These findings shed new light on structural challenges faced by emerging economies, particularly their limited manufacturing growth, and offer an alternative perspective on the mechanisms behind the persistence of the middle-income trap.

Dr Takashi Onoda (Japan Bank for International Cooperation)

Yuta Watabe