Paper short abstract:

This paper deals with the interaction of two kinds of rents, product and labour arbitrage rents. In the analysis of inequality both between country and within country inequality are considered.

Paper long abstract:

Wage inequality is an essential feature of GVCs. Specialization in the performance of tasks, yielding economies of scale and scope, allied with the management doctrine of concentrating on core competencies can result in out-sourced or value chain production. But for outsourcing to be global in nature there have to be systematic differences in labour costs (and other production costs, such as environmental costs) in production across geographies. These cost differences lead to labour arbitrage as an essential feature of GVCs providing rents to lead firms and headquarter economies. Labour arbitrage, however, is not the only form of rent in GVCs, though it may be its characteristic form. There are also resource, process, and product rents.

This paper deals with the interaction of two kinds of rents, product and labour arbitrage rents. In the analysis of inequality both between country and within country inequality will be considered. Further, while supplier or developing economies as a whole will be considered, there will be special attention to the major supplier economies of China and India, from which, as mentioned above, some lead firms have also developed. While setting out this analysis of the product and labour arbitrage factors in overall rents and inequalities, the paper will also, albeit briefly deal with the question: how does development policy respond to these inequalities in an age of GVCs?