Recent perspectives on trade and inequality, Vol. 1 of 1

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Recent perspectives on trade and inequality

Author:	Harrison, Ann; McLaren, John; McMillan, Margaret;	Collection Title:	Policy Research working paper ; no. WPS 5754
Country:	World;	Date Stored:	2011/08/08
Document Date:	2011/08/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	The World Region
Report Number:	WPS5754	SubTopics:	Economic Theory & Research; Emerging Markets; Trade Policy; Labor Markets; Labor Policies
Volume No:	1 of 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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