Recent Findings on Trade and Inequality

53 Pages Posted: 4 Oct 2010

See all articles by Ann E. Harrison

Ann E. Harrison

University of California, Berkeley; National Bureau of Economic Research (NBER)

John McLaren

University of Virginia; NBER

Margaret McMillan

Tufts University - Department of Economics; International Food Policy Research Institute (IFPRI); National Bureau of Economic Research (NBER)

Date Written: September 2010

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.

Suggested Citation

Harrison, Ann E. and McLaren, John and McMillan, Margaret, Recent Findings on Trade and Inequality (September 2010). NBER Working Paper No. w16425. Available at SSRN: https://ssrn.com/abstract=1685730

Ann E. Harrison (Contact Author)

University of California, Berkeley ( email )

Giannini Hall
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

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John McLaren

University of Virginia ( email )

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Charlottesville, VA 22904-4182
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NBER

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Margaret McMillan

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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