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Regional manufacturing wages: dancing to the tune of trade shocks

By Filipe Lage de Sousa

Abstract

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

Topics: HD Industries. Land use. Labor
Publisher: Spatial Economics Research Centre (SERC), London School of Economics and Political Science
Year: 2010
OAI identifier: oai:eprints.lse.ac.uk:33500
Provided by: LSE Research Online

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