Managerial versus Production Wages: Offshoring, Country Size and Endowments

We look at managerial and production wages in countries that di er in size and relative endowments. Production labor is assumed to be a variable input composed of tradable tasks, while managerial labor is a xed, non-tradable input. Task performance is subject to increasing returns to scale on the country level, as in Grossman & Rossi-Hansberg (2010). We rst analyze country size and relative endowment e ects on wages, ruling out task trade altogether, followed by numerical simulations highlighting the degree of freeness of task trade as an important further determinant of relative wages, both within and across countries, as well as determinants of international gaps in income per capita. JEL-Classi cation: F12, F16, F23