Globalization, trade imbalances and inequality

Rafael Dix-Carneiro and Sharon Traiberman

Journal of Monetary Economics, 2023, vol. 133, issue C, 48-72

Abstract: What is the role of trade imbalances for the distributional consequences of globalization? We answer this question through the lens of a quantitative, general equilibrium, multi-country, multi-sector model of trade with four key ingredients: (a) workers with different levels of skills are organized into separate representative households; (b) endogenous trade imbalances arise from households’ consumption and saving decisions; (c) production exhibits capital-skill complementarity; and (d) labor markets feature both sectoral mobility frictions and non-employment. We conduct a series of counterfactual experiments that illustrate the quantitative importance of both trade imbalances and capital-skill complementarity for the dynamics of the skill premium. We show that modeling trade imbalances can lead to stark differences between short- and long-run consequences of globalization shocks for the skill premium.

Keywords: Globalization; Inequality; Skill premium; Trade imbalances (search for similar items in EconPapers)
JEL-codes: F1 F16 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Working Paper: Globalization, Trade Imbalances and Inequality (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:133:y:2023:i:c:p:48-72

DOI: 10.1016/j.jmoneco.2022.10.002

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