International Trade and Earnings Inequality: A New Factor Content Approach

Rodrigo Adao (), Paul Carrillo, Arnaud Costinot, Dave Donaldson () and Dina Pomeranz
Additional contact information
Rodrigo Adao: University of Chicago - Booth School of Business
Dave Donaldson: Massachusetts Institute of Technology - Department of Economics; CEPR; BREAD: NBER

No 2020-182, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: We develop a new factor content approach to study the impact of trade on inequality. Our analysis generalizes the theoretical results of Deardorff and Staiger (1988) and improves on past empirical implementations of these results. Combined with unique administrative data from Ecuador, our approach yields measures of individual-level exposure to exports and imports, for both capital and labor income, as well as estimates of the incidence of such exposure across the income distribution. We find that international trade raises earnings inequality in Ecuador, especially in the upper-half of the income distribution. However, the drop in inequality experienced by Ecuador over the last decade would have been less pronounced in the absence of trade.

Pages: 84 pages
Date: 2020
New Economics Papers: this item is included in nep-cwa, nep-dev and nep-int
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Citations: View citations in EconPapers (14)

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https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_2020182.pdf (application/pdf)

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Working Paper: International Trade and Earnings Inequality: A New Factor Content Approach (2020)
Working Paper: International Trade and Earnings Inequality: A New Factor Content Approach (2020)
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