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Recent perspectives on trade and inequality, Volume 1
Author:Harrison, Ann; McLaren, John; McMillan, Margaret; Country:World;
Date Stored:2011/08/08Document Date:2011/08/01
Document Type:Policy Research Working PaperSubTopics:Labor Markets; Economic Theory & Research; Labor Policies; Emerging Markets; Trade Policy
Language:EnglishRegion:The World Region
Report Number:WPS5754Collection Title:Policy Research working paper ; no. WPS 5754
Volume No:1  

Summary: The 1990's dealt a blow to traditional Heckscher-Ohlin analysis of the relationship between trade and income inequality, as it became clear that rising inequality in low-income countries and other features of the data were inconsistent with that model. As a result, economists moved away from trade as a plausible explanation for rising income inequality. In recent years, however, a number of new mechanisms have been explored through which trade can affect(and usually increase) income inequality. These include within-industry effects due to heterogeneous?firms; effects of offshoring of tasks; effects on incomplete contracting; and effects of labor-market frictions. A number these mechanisms have received substantial empirical support.

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