Skilled worker mobility and wage inequality

Models by Rosen (1981) and Tang and Wood (2000) predict that reductions in travel and communication costs increase wage inequality in developed countries, by raising the productivity and earnings of a small group of highly-skilled workers. Time-series analysis reveals that both the relative number and the relative incomes of international business travellers rose during the past decade. Cross-section analysis reveals that business travellers earn substantially more than other workers, controlling for observable human capital characteristics. These findings support the predictions of both models, and suggest that the effect has been large.