Globalization and Income Distribution: A Specific Factors Continuum Approach

James Anderson ()

No 14643, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Does globalization widen inequality or increase income risk? In the specific factors continuum model of this paper, globalization widens inequality, amplifying the positive (negative) premia for export (import- competing) sectors. Globalization amplifies the risk from idiosyncratic relative productivity shocks but reduces risk from aggregate shocks to absolute advantage, relative endowments and transfers. Aggregate-shock-induced income risk bears most heavily on the poorest specific factors, while non-traded sectors are insulated. Heterogeneous shocks to firms induce Darwinian competition for sector specific factors that is harsher the more productive the sector. Wage bargaining implies within-sector wage dispersion that falls or rises with export intensity depending on the joint distribution of sectoral and firm shocks.

JEL-codes: F10 (search for similar items in EconPapers)
Date: 2009-01
Note: ITI

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Working Paper: Globalization and Income Distribution: A Specific Factors Continuum Approach (2008)
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