Globalization, Skill Accumulation and the Skill Premium

We analyze the impact of globalization upon the skill premium (inequality) in advanced countries from a two-goods NorthSouth model with skill accumulation. Globalization consists of an increase in the size of the South. Its impact on inequality depends on its intensity and on the pre-globalization proportion of skilled workers. The post-globalization inequality is a non-monotonic function of the pre-globalization proportion of skilled workers and of the globalization intensity. The impact is different for the generation in work and for the following generations. There is a threshold value of the skill endowment under (above) which inequality is lower (higher) after than before globalization.