 Are trade wars class wars? The importance of trade-induced horizontal inequalityKirill Borusyak and Xavier Jaravel Journal of International Economics, 2024, vol. 150, issue C Abstract: What is the nature of the distributional effects of trade? This paper demonstrates conceptually and empirically the importance of “trade-induced horizontal inequality,” i.e. inequality that occurs among workers with the same level of earnings before the trade shock. This type of inequality does not affect the income distribution but generates winners and losers at all income levels. To quantify the horizontal inequality and changes in the income distribution induced by trade in a data-driven way, we develop a characterization of the welfare impacts, governed by simple and intuitive statistics of labor market and consumption exposure to trade. In the U.S., we find substantial heterogeneity in exposure and thus in the welfare effects of trade shocks across workers. Over 99% of the variance of welfare changes from trade shocks arises within income deciles. These findings run against a popular narrative that “trade wars are class wars.” Keywords: Trade liberalization; Distributional effects; Inequality (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:150:y:2024:i:c:s002219962400062x DOI: 10.1016/j.jinteco.2024.103935 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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