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Recent perspectives on trade and inequality

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

No 5754, Policy Research Working Paper Series from The World Bank

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 these mechanisms have received substantial empirical support.

Keywords: Labor Markets; Economic Theory&Research; Labor Policies; Trade Policy; Emerging Markets (search for similar items in EconPapers)
Date: 2011-08-01
New Economics Papers: this item is included in nep-dev and nep-int
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