On a Theme by Williamson: A Stochastic Model for the Evolution of Global Labor Markets since 1830

The cross-sectional distribution of wages has so far been neglected compared to the study of income differences across countries over time. We propose a stochastic model, built on the theory of diffusion processes, to describe the evolution of global labor markets since 1830. The model is applied to empirical data collected by Williamson, in order to describe the level and variation of cross-country wages. The empirical application validates the proposed method.