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Recent Perspectives on Trade and Inequality

Ann Harrison (), John McLaren and Margaret McMillan ()

Annual Review of Economics, 2011, vol. 3, issue 1, 261-289

Abstract: The 1990s 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, the effects of offshoring of tasks, effects on incomplete contracting, and the effects of labor-market frictions. A number of these mechanisms have received substantial empirical support.

Keywords: income inequality; offshoring; globalization; wages (search for similar items in EconPapers)
JEL-codes: F16 F23 (search for similar items in EconPapers)
Date: 2011
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