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Recent Findings on Trade and Inequality

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

No 16425, NBER Working Papers from National Bureau of Economic Research, Inc

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

JEL-codes: F16 F23 (search for similar items in EconPapers)
Date: 2010-09
Note: ITI
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Published as “Recent Perspectives on Trade and Inequality”, Ann Harrison, John McLaren and Margaret McMillan, Annual Review of Economics, Volume 3: 261-289, 2011.

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